Why Merger and Acquisition Growth Strategies Fail

By Candis Roussel via Iris.xyz

Mergers and Acquisitions (M&A) are time-honored strategies to grow a business. Want to enter a new market or quickly add quality people to your firm? Simply buy (or merge with) a company that checks all the boxes. In a relatively short amount of time, you can add valuable new expertise, multiply your resources and reach entirely new markets. If only growth were so simple! Like any business growth strategy, M&A comes with inherent risks, too. In fact, a half-baked acquisition can create major operational headaches, damage your reputation and stop growth in its tracks.

According to Harvard Business Review, between 70% and 90% of acquisitions are failures. That’s a sobering statistic. And you don’t have to think too hard to come up with examples. Remember HP’s disastrous acquisition of Autonomy? Or Microsoft’s purchase of Nokia’s phone business? But these are giant, multi-billion-dollar plays that attempted to integrate multi-national corporations.

Smaller deals — such as a consulting firm that acquires a similar organization in another city — are somewhat more likely to work out in the end. Cherry Bekaert, an accounting firm based in Richmond, Virginia, has grown into one of the Southeast’s largest firms largely through acquiring small local practices over time.

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