In the world of mergers and acquisitions, an activity that appears to be going through its cyclical upswing currently, there is much discussion regarding revenue synergies, expense synergies, and to an (unfortunately) far lesser extent, market and cultural synergies.
What is often overlooked are the dis-synergies* inherent in each proposed merger or acquisition. With 70% of M&A failing to reach the top-line synergies promised, and 25% missing the expense reduction mark by 25% or more, perhaps it is wise to give more weight in diligence to potential disruptions - dis-synergies - than the oh-so-appealing potential synergies. While they vary from industry to industry, some of these dis-synergies include:
- Not understanding customer motivations for loyalty, resulting in more customer loss than anticipated.
- Loss of employee productivity during the period of diligence
- Underestimation of the impact of 'onetime costs'
- Loss of quality employees to competitors seeming to offer more stability
- Underestimating the amount of time to address both the external and internal requirements of a merger, including information systems, branding, reporting structures, and all related processes
*Scott Christofferson, McKinsey and Company
For more information on this, contact Strategy180 (www.strategy180.com) for the McKinsey brief.