“The merger and acquisition fever that has spread across the United States in the last three decades shows little sign of abating, even though many of the restructuring programs have proven to be less than successful. The constant furor that accompanies such activity operates as an ongoing catalyst to make top management ponder whether they too should join the fray. But because so much devastation has littered the acquisition battlefield, managers and owners realize that such a strategy is not to be taken without serious analysis, especially for smaller companies that must keep a close eye on cash flows.”
— Sharon L. Blanding, Acquisitions: How to Expand, Extend and Defend Your Business, (Chicago, IL: Probus Publishing Company, 1991)
Even though Ms. Blanding published her work 15 years ago her observations remain as relevant today, as then. The mergers and acquisitions (M&A) activity continues to be equally strong, if not stronger, with many industry experts predicting that the number of transactions in 2006 will exceed what was the record year of 2005. Equally and unfortunately still true, is the number of failed transactions that occur for many reasons, but mainly due to extremely weak target analysis, superficial due diligence, and underestimating the requirements necessary to merge the different cultures that always exist…will continue!
As HeinSight…before the fact!™! trained and supported strategists we fully understand the many benefits a successfully designed and executed M&A strategy provides our clients. We also recognize that many acquisition programs are pursued just because the acquiring company was, perhaps, flush with excess cash and, or, suffering from an enormous ego to be the “big guy” in the industry. More often than not these factors will produce a failed M&A transaction.
“…acquisitions have a significant impact on the overall profitability and financial health of a corporation. Thus, such transactions deserve the same thoughtful planning and execution as the introduction of a major new product, the building of a new plant, or the purchase of a major piece of equipment. Yet despite the importance of acquisitions to an organization, many otherwise will-managed companies fail to devote the necessary time and resources to this area.”
— Richmond G. Bernhardt III, “The Acquisition Process: A Program for Success,” in Mergers and Acquisitions 2nd ed., edited by Ernst & Young, (New York: John Wiley & Sons, Inc.) 3-4