An additional 25% never achieve the ROI that was promised.
That means 75% of mergers weren't worth it. Can you imagine walking into a CEO's office and saying, "I've got a great deal, it's got a 75% chance of failure." You'd be laughed out of the room. Yet CEOs initiate mergers and acquisitions all the time. And when their mergers fail, the first line of the article in the Wall Street Journal is always the same, "the two cultures didn't mix."
Months and months and often millions of dollars are spent combing through the books to see if all is in order, yet what CEOs forget is that companies are nothing more than structures...and those structures are filled with people. What makes two companies fit well together is not their product lines - it's how their people get along. Sadly, this little detail is often completely ignored.
Just because there is "synergy" (the rationale so often used to justify so many mergers in the first place) between product lines or marketplaces, doesn't guarantee any success. That one company makes ink and another makes rubber stamps, for example, means little when it comes to two entirely different corporate cultures needing to play nice together. Unless the plan is to fire everyone from one company and completely rehire for all the new job openings with employees who fit one of the cultures, more diligence should should be spent evaluating the cultural fit before the collision...er...merger takes place.
The great irony is that the single biggest factor that contributes to the majority of merger debacles is amazingly simple to evaluate. It costs neither millions of dollars nor countless of months to evaluate a corporate culture. It takes about a day per company. One day.
It begs the question, then, why is something so important and so crucial to the success of a merger so often completely ignored until it's too late?
The answer is uncomfortably simple: you can't see the culture. The product lines, the market opportunities, the balance sheets are all things that can be easily seen, and easily evaluated and tabulated. The culture is not. A strong culture exists when all the employees within an organization share the same values and beliefs. We can tell a company has a strong culture, not because we read it on a balance sheet, but because we can feel it when we walk the halls. There is an obvious camaraderie among the employees and a genuine desire to do good by the company. In contrast, when we walk the halls of companies with a weak culture we feel cold...or worse, we feel nothing at all. People in a bad culture are more motivated by self-gain than by a desire to see their company...and their colleagues...do well. When we feel a strong culture, we sometimes wish we worked there.
The best part is, if you try to have this discussion with so many of the CEOs who initiated the mergers in the first place, they'll tell you that what you're talking about is fluff. But if that fluff is important enough to avoid a 75% chance of a collision, then maybe it's worth buying that model with the anti-lock brakes after all.