Many mergers unlikely to deliver as promised

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John O'Connor
John O'Connor

By any standard, this has been quite a year for mergers and acquisitions in the senior living field. By some counts, more than 300 of these transactions took place in 2015.

Most of these deals are happening for the usual reasons: So the acquirers can increase the scale of their operations, expand their product portfolio and tap into new markets. But it remains to be seen whether most of these arranged unions will last.

To be sure, the deals are blessed events for the bankers, lawyers and top executives involved. Many of these beneficiaries have been transformed from mere millionaires to deca-millionaries at the stroke of a pen. Who wouldn't want to snap off a piece of that taffy?

And to hear the folks who swing these unifications tell it, the alliances surely will produce greater profits at the combined companies down the road. Media outlets tend to celebrate the deals with breathless “inside stories” of how they came together, along with flattering photos and additional coverage.

But there can be a Dark Side as well: many deals simply won't do much good for the people who didn't help orchestrate them.

Many post-merger companies must now deal with virtually impossible-to-meet revenue demands. And they must do so while also attempting to marry disparate corporate cultures.

The available research suggests that few mergers add up to significantly more prosperous or successful companies. Success is even less likely if too high an acquisition price was paid, or if the resulting company is left without a clear vision.

Does that mean the many deals we are now seeing will fail? Of course not. Quite a few make good strategic sense, and will fuel growth and prosperity.

But to be sure, some others will probably not work out — or at least they won't work out as well as had been hoped or promised.

And as for those who rashly put together deals that never should have been made in the first place? I'm sure they'll find millions of ways to take comfort.


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