Traditional corporate analysis and orthodox investment risk management should be viewed with a jaundiced eye once the mistakes keep recurring. You cannot rely on the institutions
and regulatory agencies alone to offer protection. They may be unaware of the illegal acts undertaken, the litigation may take a very long time, any compensation may be dwarfed by the
It is likely that once the first stage has been passed, the process of matching the risk appetite and the risk offer is a merely cursory exercise. There becomes little to derail the investment train. We have seen that a large proportion of strategic business decisions resulted in a significant stock price fall in Fortune 1000 companies. See Figure 5.4.
Many reasons may exist to explain the corporate marriage rationale, e.g. synergy between businesses, stronger teams, better sales and revenue figures from the M&A, but more often, the real results delivered from M&A disappoint. Let us, however, note that this rate of success, estimated at 25 %, is in line with other projects, such as financial IT system projects. Your dice are loaded at least 3:1 against your M&A succeeding.4
There is so much momentum and ego raging within the investment groups, that it is considered cowardly to back out of the original investment decision. Thus, under such a closed mindset, a due diligence or oversight check is merely a rubber-stamp of the decision to proceed. The risk-analysis and risk-monitoring processes are considered weak, irrelevant or suspect.