Inorganic growth is often essential to achieving business objectives, making M&A a strategic necessity. Yet despite the significant time, capital and resources invested in transactions, nearly half are eventually undone. Why do so many corporate marriages end in divorce, and what can dealmakers do to avoid the same fate?
In this episode of The Dealist, presented by SS&C Intralinks, Henrik Cronqvist, professor of finance at Chapman University, and Désirée-Jessica Pély, CEO of GetAlfa.AI and research associate at Ludwig Maximilian University of Munich, discuss their research into the behavioral patterns behind failed acquisitions.
Drawing on an analysis of more than 1,500 mergers and acquisitions (M&A) transactions involving S&P 500 companies, they explore why some deals are doomed from the start while others unravel because of unforeseen market disruptions. They also examine the role of corporate culture, executive overconfidence and fear of missing out (FOMO) in M&A decision-making.
In this episode, you'll learn:
- Why 46 percent of M&A transactions in the study were eventually undone
- How overconfidence, confirmation bias and FOMO can derail even promising deals
- What Microsoft–Nokia and Unilever–SlimFast reveal about why acquisitions fail
- Why cultural compatibility can make or break a transaction
- Five practical steps to avoid corporate divorce and recognize when it's time to walk away
Further reading