Match List I with List II

Choose the correct answer from the options given below:

A-II, B-I, C-IV, D-III

The correct answer is option (3) - A-II, B-I, C-IV, D-III.

List I lists out the reasons for failures in Mergers and Acquisitions. A detailed explanation of these terms are given below:

Integration difficulties: Companies very often face integration difficulties, i.e., the combined entity has to adapt to a new set of challenges given by the changed circumstances. To do this, the company prepares plans to integrate the operations of the combining entities. If the information available on related issues is inadequate or inaccurate, integration becomes difficult.

High leverage : One of the most crucial elements of an effective acquisition strategy is planning how one intends to finance the deal through an ideal capital structure. The acquirer may decide to acquire the target through cash. To pay the price of acquisition, the acquirer may borrow heavily from the market. This creates a very high leveraged structure and increases the interest burden of the company. This increased interest cost may consume a big portion of the earnings and defeat the very purpose of acquisition.

Boardroom split : When a merger is planned, it is crucial to evaluate the composition of the boardroom and compatibility of the directors. Managers or directors who are suddenly deprived of authority can be particularly bitter. Specific personality clashes between executives in the two companies are also very common. This may prove to be a major problem, slowing down or preventing integration of the entities.

Difficulties in cultural integration : Every merger involves combining of two or more different entities. These entities reflect different corporate cultures, styles of leadership, differing employee expectations and functional differences. If the merger is implemented in a way that does not deal sensitively with the companies people and their different corporate cultures, the process may turn out to be a disaster. There may be acute contrasts between the attitudes and values of the two companies, especially if the new partnership crosses national boundaries. While the process is being executed, these differences are known but often ignored. As years pass by and the combined entity tries to synergize the operations, these differences surface and often lead to failure of the merger. For example, the merger of Daimler Benz with Chrysler. While Daimler-Benz's culture stressed on a more formal and structured management style, Chrysler favoured a more relaxed, freewheeling style.