Mergers and Acquisitions Success Rates: A Study on Cultural and Language Barriers

Companies from the United States and the United Kingdom have the highest success rates in mergers and acquisitions due to cultural and language similarities, while deals between the US and continental Europe are more likely to fail, according to a new global research study by KPMG International. The report, "Unlocking shareholder value: the keys to success," analyzed 700 international deals from 1996 to 1998 and found that cultural and language barriers can have a significant impact on the success of a deal. The study identified six key factors for achieving long-term success in mergers and acquisitions, including pre-deal business activities and human resources issues.

Key Takeaways:

• Transactions involving companies from the United States and the United Kingdom are 45% more likely than average to succeed.
• Deals between the United Kingdom and continental Europe are 19% more likely than average to succeed.
• Cultural and language barriers make deals 11% more likely to fail when the United States is dealing with a company in continental Europe.
• The success of a deal requires an intimate familiarity with culture and language, as well as understanding of business and industry issues.
• Pre-deal business activities, such as synergy evaluation (business fit), integration planning, and due diligence, are critical for delivering financial benefits.
• Human resources issues, including management team selection, cultural issues, and communications, must be examined even before a deal is announced.
• KPMG analyzed 700 international deals from 1996 to 1998, with 97 interviews involving executives from companies in North America, the United Kingdom, or continental Europe.
• Respondents identified six "keys" to achieving long-term success in mergers and acquisitions.

Statistics:

• 45%: success rate of transactions involving companies from the United States and the United Kingdom
• 19%: success rate of deals between the United Kingdom and continental Europe
• 11%: failure rate of deals between the United States and continental Europe due to cultural and language barriers
• 700: number of international deals analyzed in the study
• 107: number of executives interviewed as part of the study
• 97: number of interviews involving executives from companies in North America, the United Kingdom, or continental Europe

Sources:

• "Unlocking shareholder value: the keys to success," KPMG International report released November 29, 1998