Good, bad and questionable reasons for mergers

There are many reasons, declared or hidden, for mergers. Here is our assessment of some of them:

Likely to create value

  1. An improvement in, or expansion of, the management capability - provided they can work effectively together
  2. Genuine and quantifiable operating synergies - many perceived operational synergies turn out to be illusory
  3. Financial synergies or benefits not achievable in other ways
  4. Undervaluation
  5. Proactive industry change

Questionable

  1. Market power or increasing market share - big is not always better
  2. Taxation or other fiscal considerations

Deals to avoid

  1. Pure diversification
  2. Deals in which you do not have an understanding of the cultural and behavioural differences between the organisations, and how to manage those differences
  3. "Me-too" deals
  4. Hubris - best to leave the ego at the boardroom door.

With thanks to Professor Scott Moeller of Cass Business School. For an impartial assessment of your proposed deal or for help in managing a merger that has taken place, contact Mike Robson on 0207 100 1233 or mike.robson@azurepartners.co.uk