Mauricio Duran Jun 13, 2022 9 min read

Overcoming the Challenges of Mergers and Acquisitions (M&A)

To a layperson, mergers and acquisitions (M&A) are when two or more companies consolidate along with their assets through various financial transactions. Companies would rely on M&A software designed to streamline M&A workflows & processes.

Organizations need leading analytics and real-time cloud apps in today's competitive environment. M&A software tools provide a flexible platform running core Enterprise Resource Planning (ERP) and CRM systems that can seamlessly connect to other applications within and outside the platform brand. These typically include features for each part of a deal's lifecycle.

Transparency, real-time updates, and clear presentation of conditions are critical components for mergers and acquisition deal success. Otherwise, M&A agreement components such as pipeline, diligence, and integration management may face challenges.

 

Why does M&A occur?

Companies may be willing to acquire other business entities for the following reasons:

  • Enhance needed or desired capacity
  • Acquire a platform company
  • Leverage existing possessions and properties, and capabilities.
  • Acquire a business position (from dominant to immediate entry positions).

Top reasons why M&A deals fail

Over the last couple of years, we've seen multiple mergers and acquisitions since the 2020 pandemic changed the face of the business world. The value of M&A deals in the USA is approximately 2.59 trillion. AT&T and Time Warner have been among the most well-known mergers recently. However, this doesn't mean that all M&A deals are as successful. Check out some top reasons why M&A deals fail.


1. Lack of structured M&A processes
If you don't have a good reason to carry out a merger or acquisition, it would be best if you weren't even considering merging with another organization or buying a business out.

Avoid making the wrong move by investing time, research, and effort. Come up with a strategic business plan to analyze the feasibility of your venture first. We recommend diving back into the basics; establish what business goals you want to achieve and whether M&A is a strategy that could help you achieve that.

2. Choosing the wrong company
It seems obvious enough! You'd be surprised at how many companies fail to analyze the firm they are looking to acquire thoroughly. Acquirers’ hurry to secure a business deal may be caused by misinformation and an incorrect valuation of the company of interest.

Sometimes blatant biases are involved at the heart of M&A decisions. Our self-value sometimes makes us wrongly assume that all our choices are inherently correct and the best moves we can make. This attitude may be a learned one and is especially true if we are in positions of authority.

Please be careful not to fall into the basic trap of assuming you are always right. Once you're aware of this, it'll be easier to check if you're rushing into a decision without having all the information.

3. Overestimating synergies
When increased revenues or cost savings arise, the synergy between two or more businesses occurs. It shows that the efforts of the synergizing partners are exponential when they work as one.

As one could have guessed, attaining synergy is a driving force for many businesses to consider M&A in the first place. However, sometimes, companies also end up overestimating these synergies.

To minimize the risk of overestimation, businesses should consider using virtual data rooms to help them organize their files, keep track of workflow, and securely share information with the rest of their team.

When you employ a virtual data room, you can generate reports quickly, communicate with your team effectively, and have all the facts for negotiating with sellers.

4. Overpaying
Perhaps one of the most common mistakes firms make is overpaying for companies. A large part of this is because the mergers and acquisition challenges on this list destroy company value. Buyers may be willing to pay extra because they want the company strategically. Such buyers pay more than Fair Market Value because they act under compulsion.

Buyers may also have vested interests and plan to maximize returns from a particular acquisition.

So, how do you combat this issue? Avoid the problem of overpaying by considering a suitable value for the firm in question. This value should be a limit, not a guideline. A firmly established figure as a base point can help save you millions.

5. Data sprawl inhibits optimization
Middle-tier businesses that can manage data effectively use it to help them streamline processes and customer service. Data can be spread across the organization, creating hindrances in management, security, and access.

Dynamics 365 can help your business leverage the core SaaS business app suites. This app consolidates data into a single stream. The Dynamics 365 applications can easily access these for tasks and analysis.

6. Too many systems and apps to maintain
Updating and maintaining multiple systems and applications can be stressful and overwhelming. It takes a lot of money to acquire and maintain IT strategic sources. The team often has to spend a lot of time and resources maintaining in-office hardware and software.

Dynamics 365 is a cost-effective solution that replaces the need for multiple systems and applications with a configurable, scalable cloud-based platform that is configurable to meet your unique requirements.

With the help of Dynamics 365, you can launch multiple-point solutions and eliminate the need for costly modifications. The most enticing bit is that Microsoft regularly maintains, updates, and improves the applications on its own, helping to free up your ITS staff to focus on business initiatives that help with the bigger picture.

 

Conclusion

If you're interested in learning more about M&A compliance and risks while availing yourself of Microsoft Dynamics 365, contact Definity First. Learn more here about our mergers and acquisitions deal tracker to help automate the M&A pipeline for our clients.

You can contact us now to streamline the processes of M&A and get your people on board faster and more effectively.