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Rekordbox lyric acquisition failed3/24/2024 ![]() What looked on paper like a great deal for Morrisson’s - expanding their footprint all over the UK - turned into a nightmare, essentially because the two firms served completely different types of customers. The example of British grocery retailer Morrisson’s acquiring rival company Safeway in 2003 is a testament to this. It gives you the best opportunity to do so, but there are plenty of cases where even a lengthy period of due diligence doesn’t let you know what makes a company tick. ![]() Misunderstanding the target companyĮven due diligence doesn’t guarantee that you’ll fully understand the target company. In extreme cases, this can lead to the failure of the transaction in the long run. This creates obvious agency problems.īy extension, the more uncomplimentary the information, the more the target company team is likely to withhold it and/or explain it away. One of the major problems that arise during the process is that the acquirer is depending on the target company to provide information that isn’t always complimentary to their management. The importance of due diligence can never be emphasized enough, partly because so many firms are evidently keen to get it over with as soon as possible. Why You Should Focus Less on Cost Synergies During PMI 3. And revenue synergies are no less complicated to achieve.įor this reason, practitioners of M&A would be well advised to look at potential synergies from a transaction through a highly conservative lens. While the idea that many costs will largely stay the same as two companies combined is alluring, it’s also far more difficult to achieve in practice than most managers are willing to admit. Overestimating the synergies inherent in a transaction is often the first step in overpaying. Overestimating synergies go hand-in-hand with overpaying in a transaction. It’s important for buyers to set a limit before negotiations start and stick to it to minimize the chances of overpaying. There’s little reason to doubt it’s any different in small, privately-held companies. In publicly listed companies, this usually means a premium over the share price. This effectively translates to ‘ the business is always for sale when a buyer is willing to overpay.’ Most attractive target companies operate under the assumption that ‘ everything is for sale at the right price’. ![]() This is probably the most common reason for the failure of transactions. ![]()
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