1. MERGERS &ACQUISITIONS
Reasons for failures and Corrective measures
Aakash Kulkarni MGBSEP13IBWM001
Chetan Makharia MGBSEP13IBWM008
Frederick Fransjaya MGBSEP13IBWM011
Nitish Pyara Singh MGBSEP13IBWM018

2. AGENDA
 Introduction
 Reason for choosing this topic
 Objective of this research
 Literature review
 Schematic diagram
 Framework - Fishbone
 Expert Opinions
 Summary
 Conclusion

3. INTRODUCTION
 Mergers and Acquisitions (M&A) is one of the
major aspects of a company which deals with
the Management, Corporate Strategy and
Corporate Finance.
 A Merger is when 2 companies which are of
similar size and revenue decide to join
together.
 An Acquisition is when one large company
acquires a small company for present or
future benefits.

4. REASON FOR CHOOSING THIS
TOPIC
FIGURE 1: QUARTERLY ANALYSIS M & A AS PERVALUE ANDTHE NUMBER OF DEALS
Source: MergerMarket

5. OBJECTIVES OF THIS RESEARCH
 Find reasons for the rise in number of M
& A failures.
 Identify the “INDEPENDENT” variables
and “INTER-DEPENDENT” variables
which are causing these failures.
 Provide a concise report with
IMPLEMENTABLE solutions to help
reduce these failures.

6. WHY M&A ?
1. Operational benefits
 Revenue Enhancement by gaining Pricing power
 Cost saving in terms of Advertising, R&D
2. Financial benefits
 Reduction in cost of Financing
 Risk Reduction through Diversification
3. Strategic Motives
Example – Facebook acquiring Whatsapp

7. PARAMETERS OF SUCCESS
MEASUREMENT
Economies of
Scale
Change in
BrandValue
Creation of
Barriers to
Entry
Risk
Reduction
Improvement
in
Management
Cost Efficiency
Change in
Market share
Ease of getting
Raw Materials
Increase in
Sales

8. FAILURE RATES
FIGURE 2: GlobalTMTTrend: Quarterly
SOURCE:
Mergermarket: TMT M&A Trend Report

9. REASON FOR FAILURES

10. SCHEMATIC DIAGRAM

11. FRAMEWORK - FISHBONE
 Cause and Effect Identification
 Brainstorming session
 Avoid team’s thinking to fall into repetitive
thoughts
 Prioritize to further analysis and corrective
actions

12. FRAMEWORK - FISHBONE

13. FINANCE
Example
• Google bid to acquire Whatsapp for US $10 Bn but
Whatsapp quoted US $19 Bn, thus leading to failure of
this deal
• TimeWarner and AOL merger during the dot com
bubble burst which led to US $99 Bn loss to AOL.

14. TECHNOLOGY
Example
• EBay and Skype in 2005 (and overestimating possible synergy)

15. CULTURE
Example
• Hewlett Packard and Compaq merger in 2001 that
resulted in US $13 billion loss in market value.

16. REGION
Example
• Alcatel (United States) and Lucent (France) in 2006

17. COREVALUES
Example
• Sprint and Nextel, clash between the entrepreneurial

18. SIZE
Example
• Blackberry buyout by Fairfax in 2013
• Holcim and Lafarge merger is likely to be successful as
the size of both the companies is equal and the size of
the deal is larger

19. OTHER FACTORS
Example
• VeramarkTerminates Merger Agreement withVarsity
Acquisition LLC,Agrees to be Acquired by Hubspoke
Holdings, Inc.
• Ebay and Skype in 2005 that predicted the wrong synergy

20. PROCESS
Example
• Microsoft offered to buyYahoo for 40 billion, but since
the BOD ofYahoo were not able to effectively
communicate and deliver in the Pre-Merger meeting
this deal collapsed.

21. FISHBONE DIAGRAM

22. SUMMARY
 Culture and Core values play a vital role in
the Pre-Merger and Post-Merger situations.
 Valuation of a company and the standards
followed play an important role.
 Technology, Size and Other reasons can be
controlled through careful and preemptive
measures.

23. CONCLUSION - 1
 Solutions:
◦ Investment Banks and Auditing Firms which assist
M & A must provideValuation on a common
ground.This also helps remove the
communication difference between the
companies.
◦ Cultural differences can be mitigated by improving
the understanding and purpose of the Merger and
Post-Merger, HR executives help integrate the 2
companies into one.

24. CONCLUSION - 2
 Solutions:
◦ Valuation: Before a merger commences, a company
must ensure that the amount they are paying for the
M & A is not greater than the combined present value
of the future Cash flows of the company.
◦ Appointing or hiring experienced professionals who
help foresee problems which may cause the deal to
fail and also this helps the deal to be completed
earlier as it’s done in a structured process.
◦ “Jumping in earlier has always been higher risk
and with higher risk comes greater reward” -
Jim Grebey