It's no secret that most mergers and acquisitions fail to create value. The Wall Street Journal's "Manager's Journal" takes a look at a common problem with mergers:
But if the past is a guide, markets will focus on assets, portfolios and business synergies and overlook a key to whether the deal is successful: people. People issues are often the root of failed deals, our research shows. That is because they are frequently an afterthought in the frenzy of a deal. Dealmakers gather reams of financial, commercial and operational data. But they often pay scant attention to what we call human due diligence -- understanding the culture of an organization, the roles that individuals play, and the capabilities and attitudes of its people.
This is certainly the strategy of Warren Buffett, whose conglomerate Berkshire Hathaway Inc, (NYSE: BRK.A) has grown successfully bu focusing on acquisition with strong management that wants to stay on. Berkshire avoids integration/people problems by integrating new companies as little as possible.
Given the importance of relationships in the outcome of deals, you have to wonder if some of the more conentious buyouts are doomed to fail.
For instance, The Finish Line Inc. (NASDAQ: FINL)'s acquisition of Genesco Inc. (NYSE: GCO): When Genesco reported a bad quarter, Finish Line suggested that it might attempt to back out of the proposed merger agreement. Now lawsuits and rhetorics are flying and shares of Finish Line are scraping 5-year lows. It raises the question: If the merger does end up being completed (Possibly because Finish Line has no choice), will these people be able to work together?
For a list of other deals that could find themselves struggling because of people problems, check out Private Equity Deals that have Hit Snags. In consummation isn't smooth, then integration is unlikely to be a doozie either.
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Reader Comments (Page 1 of 1)
10-03-2007 @ 8:13AM
bob said...
I don't find it hard to understand the people problems today. Too many want to condemn business practices, or bring their own ideals into a tried and true business. Business isn't out to save the world, everyone participating is trying to further themselves and those around them. I once asked someone near and dear to me, how do you put up with the problems? He said I don't. I fire them. Thats success, take it or leave it.