M&A Dis-Synergies

So why don't all mergers and acquisitions work? Probably the main reason is that acquisitions are done based on assumptions about the future, and these assumptions may not be realized. A major assumption generally involves the synergies that are expected to be realized from the acquisition. A recent article argues that in failed acquisitions, the buyer pays too much, often due to dis-synergies. For example, GE has performed poorly because poor acquisitions over the past 20 years, which were often based on a poor analysis of synergies. And, athough we don't discuss the topic of corporate culture in Finance, many times a combination of two companies with dramatically different corporate cultures will result in a combined company that fights with itself. Although such an analysis is important to evaluate before an acquisition, and valuing a corporate culture clash is difficult, be aware that it does add to the risk of an acquisition.