70-90% of acquisitions fail.
ā€” most of them an issue of integration.

BUT there's more to it: New HBR insights suggest a pattern worth studying šŸ‘‡

3 TYPES of acquisitions:
[Spoiler: One of them seems to be disproportionally prone to failure]

1. Same Industry
ā€” printing company buys a smaller one

2. Unrelated Diversification (Conglomerate)
ā€” printing company also owns a clothing store and retailer

3. Related Diversification
ā€” printing company buys graphic design company

The author Dr Graham Kenny suggests that problems are particularly severe when
the acquisition is a related diversification.

He cites an example of a large printing company he worked with buying a graphic
design company.

Assumptions:
Clients will buy printing and graphic design services
Cross-selling opportunity
Better profit margins

2 years later the acquisition was unwound and sold off. Big failure.

Issues:
Wrong assumptions
Clients were disinterested in broader offer
New business model failed

While integration is a challenge in any acquisition, RELATED DIVERSIFICATION
faces the added challenge of a new conjoined business model

Have you noticed the same pattern?

#MA #acquisitions #PE #investing

CapLinked - Trusted Virtual Data Rooms
Post credit to our COO/ Founder Christopher Grey



Originally posted by Greg Brinson on LinkedIn
link: linkedin.com/in/gregbrinson