Editor's View

Why acquisitions fail

Dec 07/Jan 08 issue

‘Nobody knows anything,’ said William Goldman, the screenwriter behind classic movies such as All the President’s Men and Butch Cassidy and the Sundance Kid.

The screenwriter’s point was that you can use all the tried and trusted plot devices you like, throwing in the star names and glamorous faces, but you can’t guarantee a hit movie. Sometimes, audiences will just say no.

Goldman’s pearl of wisdom could equally apply to acquisitions. A survey by management consultancy Hay Group recently found that only nine per cent of acquisitions in Europe have achieved their stated objectives.

The research attributes this to acquirers dwelling on obvious challenges, such as IT and finance systems integration, while failing to appropriately address their cultural compatibilities. In other words, they spent little or no time wondering how they would integrate their new employees into their company’s culture.

But bedding down staff is why acquisitions take longer than expected and it’s the one thing you can’t conduct due diligence on. After the sale and purchase papers have been signed, even the most fantastic of your new employees will need time to adjust, find their feet and settle into their new environment. As long as you don’t underestimate the challenge, you should avoid the problems encountered by the chief executives we profile in this month's Flotation feature.

Worries about integrating new people shouldn’t prevent you from forging an M&A route to expansion – especially in the year ahead, because if the general economy takes the dip everyone is expecting, it’s a fair bet that quite a few businesses will be forced to consider selling before the game is up. That means those ventures that have courage and verve – and a balance sheet to match – should be able to go cherry picking.

If you’re seeking the finances to match your ambition, then our 15 ways to raise £1 million should steer you in the right direction – as should our range of mid-market seminars and events in 2008. Have a merry Christmas and prosperous New Year.