Analysis on North European Company Doing Business in Brazil

Just to look at M&A, many observers feel that the global business environment is ripe for a wave of mergers and acquisitions due to the abundance of cash on corporate balance sheets and the perception of limited organic growth opportunities. Business combinations across national boundaries have become an increasingly important feature of the global business landscape. The value of transactions grew from over $180 billion in 1997 to over $1 trillion in 2007, alone exceeding the GDP of such countries as Mexico, the Netherlands, Korea, Turkey, and Indonesia. In 2010 alone, there were over 150 cross-border transactions with a value exceeding $1 billion each.

At the same time, research indicates that over 80% of mergers and acquisitions fail to enhance shareholder value and over 50% actually destroy value (Marks and Mirvin). Both research and common experience also show that participating in merged/acquired companies can be challenging from a human resource point of view and extract a heavy toll for employees involved in the process. As one indicator of stress, it's been reported that over 70% of acquired firm executives leave their jobs within 5 years of merger completion (Cartwright and Shoenberg).

While reasons for this failure include completing deals at the wrong price or at the wrong time, as well as failed integration processes, it has also been suggested that the roots of many failures can be traced to a lack of upfront "organizational due diligence" on the part of the involved parties. In fact, one study of acquisitions demonstrates that successful acquirers are 40% more likely to conduct a thorough evaluation of organizational factors than unsuccessful acquirers prior to completing the combination.