Mergers of Trading Companies and Causes of Their failure

Jaroslav Sedlacek, Petr Valouch

Abstract


Mergers and acquisitions do not have to be a guarantee that expected effects will be generated and they do not imply success automatically. They are implemented to bring advantages but we have to take into account that they are a sophisticated process in which company processes of different companies with different cultures are to be reconciled. The great risk related to mergers provides inspiration for their deeper exploration and publishing of results in scientific papers and professional literature.

The aims of the research are to analyze mergers from the point of their success or failure, establish the extent of unsuccessful transactions implemented in the Czech territory and explore their causes, as well as to compare the results with published data. The aims lead to the formulation of hypotheses in the field of development tendencies of implemented mergers as a whole as well as when explored for particular economic activities. The effect of the company size on the success of mergers is also examined. The results were verified testing the hypotheses with empirical data. The tests performed to the data taken from financial statements of the recent 7 years have confirmed that failure of mergers can be expected in 55%–68% of the basic set, i.e. all mergers implemented in the monitored period, with 95% reliability. The hypothesis of the direct link between the successor company size and merger success has not been confirmed. The results of the questionnaire research lead us to the conclusion that the highest risk of merger implementation in the Czech conditions is presented by the maintenance of employees and customers; on the other hand, a merger that follows an acquisition and thus represents finishing of the transformation process of a company seems to be trouble-free.

DOI: http://dx.doi.org/10.5755/j01.ee.29.4.8868


Keywords


company transformations, types of mergers, merger development, unsuccessful mergers, macroeconomic environment, regression and correlation analysis.

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Print ISSN: 1392-2785
Online ISSN: 2029-5839