Editing Mergers and acquisitions (section)

==Failure==
Despite the goal of performance improvement, results from mergers and acquisitions (M&A) are often disappointing compared with results predicted or expected. Numerous empirical studies show high failure rates of M&A deals. Studies are mostly focused on individual determinants. A book by Thomas Straub (2007) "Reasons for frequent failure in Mergers and Acquisitions"<ref>[{{cite book |title=Reasons for frequent failure in Mergers and Acquisitions: A comprehensive analysis |last=Straub |first=Thomas |year=2007 |publisher=Deutscher Universitäts-Verlag (DUV), Gabler Edition Wissenschaft |location=Wiesbaden |isbn=978-3-8350-0844-1 }}]</ref> develops a comprehensive research framework that bridges different perspectives and promotes an understanding of factors underlying M&A performance in business research and scholarship. The study should help managers in the decision-making process. The first important step towards this objective is the development of a common frame of reference that spans conflicting theoretical assumptions from different perspectives. On this basis, a comprehensive framework is proposed with which to understand the origins of M&A performance better and address the problem of fragmentation by integrating the most important competing perspectives in respect of studies on M&A. Furthermore, according to the existing literature, relevant determinants of firm performance are derived from each dimension of the model. For the dimension strategic management, the six strategic variables: market similarity, market complementarities, production operation similarity, production operation complementarities, market power, and purchasing power were identified as having an important effect on M&A performance. For the dimension organizational behavior, the variables acquisition experience, relative size, and cultural differences were found to be important. Finally, relevant determinants of M&A performance from the financial field were acquisition premium, bidding process, and due diligence. Three different ways in order to best measure post M&A performance are recognized: synergy realization, absolute performance, and finally relative performance.

Employee turnover contributes to M&A failures. The turnover in target companies is double the turnover experienced in non-merged firms for the ten years after the merger.{{citation needed|date=July 2017}}

M&As involving small businesses are particularly problematic and have been found to take longer and cost more than expected with organisation cultural and effective communication with employees being key determinants of success and failure <ref>{{cite journal |last1=Steen |first1=Adam |last2=Turpie |first2=Keith |last3=Ng |first3=Gee Wan |title=Microcap M&A: An Exploratory Study |journal=Australasian Accounting, Business and Finance Journal |date=2014 |volume=8 |issue=2 |pages=52–70 |doi=10.14453/aabfj.v8i2.5 |doi-access=free}}</ref>

Many M&A fail due to lack of planning or execution of the plan. An empirical research study conducted between 1988 and 2002 found that "Successful acquisitions, as defined by return on investment and time to market, are more likely to involve complex products but minimal uncertainty about whether the product is functional and whether there is an appetite in the market."<ref name="MandelCarew2011">Mandel, Michael and Carew, Diana (2011, November 11). Innovation by Acquisition: New Dynamics of High-Tech Competition. Progressive Policy Institute. https://www.progressivepolicy.org/wp-content/uploads/2011/11/11.2011-Mandel_Carew-Innovation_by_Acquisition-New_Dynamics_of_Hightech_Competition.pdf</ref><ref>{{Cite book|last=Chaudhuri|first=Saikat|title=Can Innovation Be Bought: Managing Acquisitions in Dynamic Environments|year=2004|location=Harvard Business School}}</ref> But failed mergers and acquisitions are caused by "hasty purchases where information platforms between companies were incompatible and the product was not yet tested for release."<ref name="MandelCarew2011" /> A recommendation to resolve these failed mergers is to wait for the product to become established in the market and research has been completed.

Deloitte<ref name="deloitte">{{Cite web|title=M&A: The Intersection of Due Diligence and Governance|url=https://www2.deloitte.com/us/en/pages/center-for-board-effectiveness/articles/mergers-and-acquisitions-due-diligence-and-governance.html|access-date=2021-04-27|website=Deloitte United States|language=en}}</ref> determines most companies do not do their due diligence in determining whether a M&A is the correct move due to these four reasons:

* Timing
* Cost
* Existing knowledge of the industry
* Do not see the value in due diligence

Transactions that undergo a due diligence process are more likely to be successful.<ref>{{Cite journal|title=Post-Deal Success Starts at Due Diligence Stage|journal=Bureau of National Affairs Corporate Weekly|volume=45|pages=357}}</ref>

A considerable body of research suggests that many mergers fail due to human factors such as issues with trust between employees of the two organizations or trust between employees and their leaders.<ref>{{cite journal |doi=10.1016/j.leaqua.2019.101365 |title=Merger-specific trust cues in the development of trust in new supervisors during an organizational merger: A naturally occurring quasi-experiment |year=2020 |last1=Lipponen |first1=Jukka |last2=Kaltiainen |first2=Janne |last3=Van Der Werff |first3=Lisa |last4=Steffens |first4=Niklas K. |journal=The Leadership Quarterly |volume=31 |issue=4 |page=101365 |s2cid=212957211 |doi-access=free }}</ref>

Any M&A transaction, no matter the size or structure, can have a significant impact on the acquiring company. Developing and implementing a robust due diligence process can lead to a much better assessment of the risks and potential benefits of a transaction, enable the renegotiation of pricing and other key terms, and smooth the way towards a more effective integration.<ref name="deloitte" />

M&A can hinder innovation by mismanagement or cultural differences between companies. They can also create bottlenecks when they disrupt the flow of innovation with too many company policies and procedures. Market dominant companies can also be their own demise when presented with an M&A opportunity. Complacency and lack of due diligence may cause the market dominant company to miss the value of an innovative product or service.