Buyers and merger partners assume that the new, integrated company will be more competitive and create more shareholder value than the separately owned companies. Usually, announcements of mergers and acquisitions are made with great fanfare, and solemn promises are given that the synergies and the good strategic fit will increase shareholder value.
Reality suggests otherwise. A 1999 study published in the Harvard Business Review found that only 21 percent of acquisitions in several industries could be viewed as clear successes. In other words, nearly 80 percent of those acquisitions were either disappointing or clear failures. How can such a commonly practiced, promising business strategy so often end in disaster?
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