M&A failure linked to poor timing and inexperience

The financial services profession will continue its 30-year trend of acquisition 'failure' unless it starts to seriously consider long-term risk and culture fit, a broker believes.  

Selecting the wrong dealer group, selling at the wrong time and lacking industry knowledge has left to a raft of regret from both large and small firms in the past, according to Connect Financial Service Brokers chief executive Paul Tynan.  

He said the failure is represented by the "loss of client value, advisers, management and capital investment written off" and will persist unless the formula is changed.  

"Whether selling, merging or acquiring, it is important to understand that the process takes time in order to achieve the desired outcome - and in many cases the parties will only have a single opportunity to do it right." 

Tynan said businesses need to take into account the cultural and staff fit - an area that has been particularly neglected with overseas transactions. 

He said outsourcing some of the decision making around timing and suitability could improve Australian firms' chance of success.  

"Irrespective of size, businesses would be better off outsourcing their selling, merging and acquisition activity as the cost of engaging a consultant can never match the loss of shareholder capital and opportunity cost for bad decisions," he concluded.