Tuesday, September 29, 2009

Why 70% of Acquisitions Fail

For forty years or more it has been known that 60% of acquisitions fail; some put the failure rate as high as 80%. The problem does not lie with the due diligence. By and large they are carefully and professionally done.

Rather, it resides in what the due diligence does not address at all: The root cause, the origin, the driver, of all performance and results, the Operating Dynamic of the company, its very Will to Compete. This is the stuff success (or failure) is made of; the stuff on which an acquisition should be based; the stuff with which a merger should be carried out. Yet is it almost never measured.

Why this is so, is simple enough: It is widely believed that the operating dynamic is something not measurable, something mystical, something almost spiritual; perhaps also because looking at the exposed soul of a company might be embarrassing.

But the operating dynamic is measurable - in great detail. And its measures PREDICT performance long before that shows in the financials. An article on this, first published in the CEO Refresher, may be found at The Corporate Polygraph. Another article, The Black Hole in the Due Diligence Audit, will appear in the October 2009 edition of Corporate Finance Review -

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