A merger is ultimately a bad idea when it doesn’t work on the first try. The cost of these transactions put a strain on employees, revenues, and profits margins. Before investing time into a merger, the companies that are combining need to be independently successful. They must share more than a desire to increase earnings. The path that each business took to achieve its successes is unique. These paths often can’t be joined at will, for here are the main reasons mergers fail. 

Combining Incompatible Cultures

A horizontal merger brings together two companies that seem exact—at first glance. What seems equal can change fast once an analyst works to examine the internal cultures of each company—culture results from a business’s practice and how its employees all relate. Management styles, for example, come from the choices that each company made on its path to success. Trying to change these cultures is tough, and combining them might be impossible. 

Lacking a Reasonable “Why”

Mergers and acquisitions do achieve success but have a historically low potential for success. Success here isn’t impossible, but the reasons fuel your decision to merge have to be financially viable. Ultimately, your analysis of the risk must prove an opportunity while the cost of the transaction shouldn’t require debt. Neither should it reduce your company’s profit margins. 

Using It to Fix Internal Problems

A merger shouldn’t be considered a strategy for fixing internal problems—the ideal conditions for businesses to merge within existing when both are independently successful. Success is difficult to assess because investing is about buying when things are low and selling them high. A business that lacks capital, however, isn’t equal to one without an honest product. 

Mergers are complex transactions that formulate in specific ways. Businesses with identical products issue the most common type of merger. Those who serve the same consumer can grow their market share in a specific industry. Mergers that aim to bring businesses within different industries need larger capital. Though one business could receive more resources and exposure, the smaller agency will likely need to adapt to the larger.