M&A: Why M&A's fail when the rubber meets the road?



We've noticed many M&A decisions fail in the Automobile sector. Let's have a look at the reasons:


1. The Culture-Clash problem:

Deep within the heart of every car maker is their culture, that is stubbornly difficult to change. The mergers can be made successful only by chameleon like leaders who can bridge the cultural gap and narrow them.


2. Political Connection:

Car companies have deep links with their national identity. Any merger deal that involves closing plants or losing jobs faces huge political resistance, making the merger unsuccessful.


3. Families Still Dominate:

Family ownership still dominates the sector. Inherited stakes of families in the likes of FCA, Ford, Volkswagen, PSA, Toyota and BMW act as a deterrent to anything less than the friendliest merger approach.


4. Execution:

Employees, customers and investors need to understand why the deal is a good thing, what to expect via the process. Financial systems, ERP systems, HR systems and customer-facing systems need to be integrated, retired and created. Product portfolios need to come together. New products may get introduced. And the list goes on. There are many potential points of failure in the execution front.


5. Technological Barriers:

OEM's have their own unique platforms on which they build their software and hardware products. A merger requires software and hardware platforms to be merged, which creates a lot of chaos as to whose platform is better, more suitable and adaptable. This problem is seldom observed in case of a vertical integration or mergers. In a vertical integration, the company on the lower end of the value chain starts customising products to the company on the higher end of the value chain thus creating a win-win situation for both.

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