Though the number of acquisitions in UK manufacturing is currently down, there are few signs that those who do buy are doing so any more judiciously. Research by management and technology consultants Pera International shows that the acquisition failure rate remains at an alarmingly high 50%, a figure largely unchanged since the 1970s. The lessons, explains David Riley, director of Pera's acquisitions support group, are simply not being learnt.
"The current pattern is to spend 80% of management time and costs on financing, taxation, legal and contractual issues and 20% on the market, technology and people issues," observes Riley. "Successful acquisitions usually have the reverse equation." Pera's survey found that creating a full list of targets, setting an offer price and post-acquisition integration were regarded as the most difficult tasks. It also found that confusion and duplication of roles within the new organisation was the most common cause of failure. In many cases, decision-making simply grinds to a halt. Riley stresses the importance of companies learning the lessons before the level of acquisition activity once again takes off. "There are all the signs that companies are still doing the groundwork but are keeping the cash on their balance sheets," he notes. "The intelligence gathered is clearly being kept for an upturn."