Great article by Justin on some insight as to why some deals fail or destined to be failure –
1. By not fully valuating the interested company (base value plus supposed synergy value)
2. Shareholders are very likely to suffer if the merger value is more towards full value, as the element of surprise due to synergy is built-in.

Although Justin’s article is pretty comprehensive, I just wanted to add my perspective in favor of /against acquisition/merger on some other softer measures
a. Sometimes for strategic acquisition where competitors are also eyeing on buying, companies have to step-up the plate as the company as to evaluate the scenario if the competitor successfully acquires the interested company (Game Theory) (e.g. outlooksoft – SAP bought this company when Oracle was eyeing, renamed the brand as Hybris and have successfully integrated into SAP group of companies. Here SAP had to increase the premium for the acquisition
b Synergy is often overstated in any M&A , in my opinion. There are many potential issues in M&A – Cultural mismatch, eliminating redundant jobs creating friction in both companies, increased complexity in management etc. This requires some matured BOD to guide the M&A to work smoothly. Thanks Justin . Good read.

Justin Johnson

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