Six signs of a successful merger1. The two companies are in the same line of work. In the A.T. Kearney study, 80% of the top performing deals were between companies in related businesses. Michael Traem, author of the study, found that companies that buy outside of their industry tend to struggle. "When a company goes into a new business there are a whole new set of rules and business practices that have to be dealt with," he says. A good sign: Both companies make the same product. Think MCI Worldcom. 2. The buyer has a strong core business. The buyer has to know what it does best, too. Traem’s research found acquirers with a strong core business showed a higher track record of successful mergers. A good sign: The buyer’s products or services are easily recognizable and sell globally -- like Mercedes Benz. 3. The buyer has a voracious appetite. The study also found that 74% of the top performing mergers were initiated by companies that carried out more than three mergers over the last five years. "It is important to look at companies that are able to learn from the past to transform deals into the new company quickly," Traem says. A good sign: The buyer’s annual report boasts several successful mergers. 4. The buyer is bigger. Mergers of equals are less successful than acquisitions of smaller companies. Traem says top executives' egos can conflict when equals join. Officials of smaller companies expect to profit, but not to be involved in the new company hierarchy. A good sign: One company is a household name. The other is not. 5. The buyer acts quickly after the merger is completed. The first 100 days of a merger set the tone. Successful companies quickly announce a top-level management team and create a clear company goal. "Speed is the most important aspect of a merger’s success," Traem says. "After signing the deal, interest can wane. It is important to see a team set up to push for the success of the merger." A good sign: The top management is determined within a week after the deal is announced. 6. The company keeps communicating. Traem found that if a company is not communicating its merger plans to the public, it is probably having trouble communicating internally as well. Lack of communication can slow the integration of the two firms -- hurting the newly merged corporation. A good sign: Detailed and frequent merger-related press releases are posted on the company’s Web site several weeks after the merger. |
MergersCan you make money in mergers? Six signs of a successful merger
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