Global M&A advises, especially investment bankers are doing extremely well consuming trillions of dollars in deals as a result of cheap debt, ambitious company executives and a desire for expansion (Financial Times [FT], 12/21/2006). The offers announced in 2006 have exceeded those consumed in 2000 by more than 16%, with a total of 3,900 billion dollars. According to Dealogic statistics and reported by the FT, the top ten investment bankers including Goldman Sachs, Citigroup, JPMorgan etc. they have been working on deals worth $7.341 billion in 2006. The media gives extensive coverage of these deals. It is common knowledge that once these mergers and acquisitions are consummated, bankers and corporate executives reap significant financial rewards, as do investors in the acquired companies. However, the media does not provide the same level of coverage of what it takes to make these corporate marriages successful. It is essential to report on the challenges of post-merger integration (PMI). For these mergers and acquisitions to be successful, corporate executives must avoid eight classic mistakes (ie, deadly sins).

During the dot-com boom and M&A boom in 2000, Monnery and Malchione reported the 7 Classic Mistakes (also known as the “7 Deadly Sins of Mergers”) M&A executives make based on his analysis of 200 mergers (Financial Times Management Viewpoint, February 29, 2000). They concluded that the most common reason for failure is underestimating the difficulty of successful post-merger integration (PMI). In an FT article titled “Point of view: Why mergers aren’t for amateurs…” (FT, Feb 12, 2002), Knowles-Cutler and Bradbury came to the same conclusion after reviewing a Deloitte study and Touche on mergers and acquisitions. In my book, “Blueprint for a Crooked House” (www.iloripress.com), I used the 7 Classic Mistakes to analyze and report the failure of the global joint venture between AT&T and British Telecom; and added the eighth deadly sin: inadequate attention to customer needs.

In response to a question from Bernhard Klingler, Linz, Austria, about how to handle post-merger challenges, Jack and Susan Welch recently reported on the six sins of mergers and acquisitions (BusinessWeek Online, October 23, 2006). Welch’s six sins constitute a subset of the classic eight wrongs. It is important to remind business executives of these classic mistakes so they can avoid them and reduce financial losses to stakeholders and the economy. The eight deadly sins excerpted from my book, Blueprint for a Crooked House, are reviewed below:

1. Assuming that all partners are equal. “Mergers of Equals” is a legend. Someone needs to be in charge to resolve the blocks which may be impossible to do in a 50-50 partnership where it is not clear who is in charge.

2. Use of a unique approach for each business unit. Each new business unit has its unique cultures. The marriage of the culture of the new organization with the culture of the acquirer must be done carefully.

3. Manage organizational change without leading. This is what Jack and Susan Welch refer to as “taking bold steps with integration.” The acquiring company is encouraged to take the iron while it’s hot – complete the onboarding process within 3 months of acquisition while participants are still excited and motivated about the new opportunity.

4. Paying too much attention to cost savings as the main strategic opportunity. Don’t be too desperate for the acquisition to fall into what Jack Welch calls a “reverse hostage” situation.

5. Expect to get most of the benefits by the end of the first year. This goal will be more difficult to achieve if the acquirer pays too much for the merger (ie 20-30% above market price, Jack Welch).

6. Believing that the Organization cannot be stabilized until all the facts are known. This belief can lead to what Jack Welch calls the conqueror syndrome, a situation in which the acquirer installs his own people in all critical positions. This defeats the main goal of the merger, which is to fill a strategic gap. that if their people have the experience to grow the company and fill the strategic gap, they may not need the acquisition.

7. Declaring victory prematurely and not following through on promised organizational changes.

8. Failing to consider the impact of customer reactions to the merger. In a Business Week-sponsored study conducted by the University of Michigan and Thomson Financial Corporation on the American Customer Satisfaction Index, it was found that 50% of consumers report being less satisfied two years after a merger. “Businesses can take years to turn around customer sentiment and stop losses” (Emily Thornton, Business Week, December 6, 2004, pp. 58-63).

Bottom Line: Whether hostile or friendly, company executives and shareholders should seriously consider the impact of PMI on mergers and acquisitions. The Sarbanes-Oxley Act, which requires more information about the performance of the board of directors and executives of public companies, may help address some corporate governance issues, but until stakeholders address the eight classic mistakes outlined above, we will continue experiencing significant failures. in M&A activities. As noted above, M&A promoters are doing very well financially, but for the sake of customers, employees, and other stakeholders, executives need to invest more resources in avoiding the eight deadly sins for ensure the success of the post-merger integration.