Reasons for failure in mergers and acquisitions

Abstract

Embraced in this study, is the content and structural approach on how corporate mergers and acquisitions should be planned and executed to facilitate post-acquisition synergies and improvement in customer service levels. The project covers Saambou bank post-acquisition business failure after take-over by First Rand Group, in a horizontal integration process that did not diversify or restructure product or service offerings between the two banks. There being no positive impact on post-acquisition market share and competition sustainability by the two banks, it implied that, the post-acquisition strategy did not adequately address the business risk factors that ultimately impaired the expected synergies of a take-over bid. Lack of proper post-acquisition business plan resulted in corporate failures pertaining to ineffective competitive strategies, non optimization of market and service levels, compounded by poor corporate governance resulting in the bank's internal control procedures and processes failing. Furthermore, poor customer service levels and transgression of the Bank's Usury Act regulations, rendered the organization more uncompetitive. The over-reliance on few large corporate customer deposits added a huge element of financial risk that marginalized Saambou bank's going concern prospects. Hence, upon experiencing few large corporate deposit withdrawals, for instance by Investec, resulting in the bank undergoing liquidity problems that resulted in it being placed under curatorship.