Customer Reviews

Mergers: What Can Go Wrong and How to Prevent It (Wiley Finance)

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I have read a lot of information about the whys and hows of going through the merger and acquisition process. This book provides valuable information about why these deals so often disappoint and almost never live up to the hype. Patrick Gaughan explains the basics of what mergers and acquisitions are, how they are justified, what the real reasons are that often drive the deals, and what goes wrong.

The explanations on CEO hubris, how faulty incentives in their compensation packages often drive bad deals, and how they often leave others to take the blame and clean up the mess. I particularly endorse the advice Gaughan gives about the board as a check on bad CEO behavior.

I also think that the discussion on methods of divestiture of bad deals is very good. Particularly the necessity of evaluating the impact on shareholder value before simply jumping into divesting the acquisition. That is, a bad deal is bad, but unwinding the bad deal might well be worse. You must be sure that the shareholders are better off after the divestiture.

When a company can get a stronger focus after getting away from the distractions of a bad acquisition, the returns often justify the divestiture. Gaughan also discusses the importance of considering strategic alliances and joint ventures before jumping into the M&A pool.

The author always provides good summaries of what recent research shows about every aspect of these deals. If I do have one nit to pick, it is that the language in the book is unnecessarily legalistic. Why in the world does the book even need one whereas? Faux formality impedes understanding and enjoyment of reading this great material. Really, the kind of academic formality in writing is just out of date. But this is a small fault.

Many books deal with mergers and acquisitions (M&As) and how to conduct them; this one focuses primarily on the likelihood that your costly deal will fail. Patrick Gaughan tells you how to avoid bad deals, how to undo them, and what alternatives to consider before entering into an acquisition. The book is full of valuable and even interesting information, and Gaughan's experience on the legal side of the M&A process shows through - sometimes in the form of stilted language. getAbstract recommends this book to high-level executives, lawyers, and anyone else who stands a chance of getting involved in M&A activity.