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Histories of Cambridgeshire Moat House and Menzies

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The authors propose a best practice framework that can guide executives who want to launch takeovers, reiterated that whatever the integration strategy, the human side is crucial, and suggested ways to facilitate post-merger integration. Rovit, Harding, and Lemire (2004) suggest what they call a simple M& A model for all seasons, based on practice and experience.   The authors, consultants of Bain and Company, conducted a 15-year longitudinal study of over 1,600 global companies doing over 11,000 deals.   Their analysis showed that companies who succeed in deal-making and integration maintain a constant program of transactions, regardless of general economic conditions.   The knowledge from each deal is captured and used for arranging the next one. Hansen (1999) discusses how small companies are rolled up into larger ones through acquisitions, in effect changing the face of entire industries and generating huge profits for the companies involved.   He gave examples of waste management and convenience stores. Gadiesh and Ormiston (2003) show that several well-structured studies prove that more than half of acquisitions actually destroy shareholder value instead of achieving cost or revenues benefits.   They cite several causes of failures: overpayment for overestimated value, inadequate integration planning, the lack of communication, and cultural mismatch, to name a few.

But topping the list is poor strategic rationale.   They point out that a strategic rationale for an acquisition is critical, but as over half of acquisitions destroy shareholder value, having the correct rationale helps identify the right target, inform the preparation and valuation of the merger, leadership and communication styles, and set negotiation boundaries.   The most important key to success is integration, the hard work of bringing two company cultures together, building upon the strategic rationale that should include forecast goals for combined market share and cost reduction, planning the steps to achieve them, and creating the measures of performance improvement.

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