1. Introduction Merger and acquisition (M&A) are a broadly used phrase to describe the integration of companies.

The terms are used interchangeably. Nonetheless, they are entirely dissimilar in meaning. An acquisition is the takeover of a firm by purchase of that firm's common stock or asset (Brealey, Meyers, Marcus, 2004, p.590), and a merger is defined as combination of two firms into one, with the acquirer assuming assets and liabilities of the target firm" (Brealey et al, 2004, p. 589). However, there is an argument which says, in reality, all mergers are acquisitions. This means when two firms frequently join it looks as if it is an acquisition predictably, merely one group arises to leadership the newborn company further and these team representatives normally arrive from the acquiring company or the strongest company (Dixon, 2008). In recent years the number of Merger and acquisition has been increasing dramatically worldwide.

Different reasons are given for the increase, such as business

expansion, boost in profits and cost reduction are some of them. Hence, the main reason for integration of business is the increase of competition globally.
Unluckily, despite the increase of mergers the failure of the strategy is a

stagnant, and it is said to be up to 40% of merger and acquisition fail to achieve their proposed plans(Kummer & Stenger et al., 2008).
Therefore, the purpose of this paper is to discuss the reasons behind the failure of the mergers and acquisitions using empirical evidence. There are many reasons why mergers might fail, but again, each deal has its own problems. On this paper, the widely common five reasons are discussed, which are culture, leadership, communication, external consultants and promoters and over-optimism. Culture which is the most prominent reason is also identified and discussed, how it is the foremost reason in. A brief conclusion of the paper is finally provided to summarise the empirical evidence gathered from different authors and publications.

2. Reasons of Merger and Acquisition failure A number of the reasons for merger and acquisition failure are due to high competition, new financial methods and change of laws all over the world. M&A consultants usually advise on the broad economies of scale that can be achieved from the strategy. However, there is always a luck interpreting the proposals into practicality as well (Boateng, 2006). Moreover, most of the authors agree that this is due to the difficulty in cooperating and integrating of the cultures (Viaga et al, 2000). Observing carefully at the figures of merger failure can make it clear the scale of merger failure. A study by Armstrong (2006) based on an inspection of 1,000 companies showed that above 2/3 were unsuccessful to achieve their revenue targets after the amalgamation, and merely 46% meet their cost reduction targets. Similar the study by Kummer & Stenger (2008) indicates that 58% of mergers lacking to accomplish their fixed target, and barely 42% of worldwide mergers handling to exceed their contestants following two years. And again although of companies promise to keep the experienced and skilled staff after the merger or acquisition , 47% of them leave the acquiring company following the first year and on around 50% decrease in efficiency in the first six to eight months of the incorporation (Kummer & Stenger, 2008). The causes for M&A are many and different from individual case. The following is selected and very common reasons for M&A failures: 2.1 Culture Cultural difference is the widely mentioned reason of merger and acquisition failure. Because it decreases expected performance, cause departure of skilled and experienced managers and time wasting intense disagreement in the process of integration (John C. Bruckman, 2007). Culture has a very important role in a way how employees influence of the new organizational change. Boateng (2006) claims that the term culture clash has been used to explain the disagreement of two companies objectives. idea, approach, principle, and

Viag (2000) states that it is often required five to seven years to ensure that employees feel integrated with the new cultural changes. The multitude change has been witnessed causing multiple problems after a merger (DiGeorgio et al, 2003). A lot of the problems are also related to fearing of employees from losing their jobs. Moving into a new management with uncertain directions is painful and can cause a lot of anxiety (DiGeorgio, 2003). There is also wariness of losing very effective team members and doubt in relation to the new staff and management to be inherited from the merger. If the change is forced, the new staff members and management will start developing a fear of taking risks. This can cause unwanted division among of the two merging companies (DiGeorgio, 2003). Companies faced with such a circumstance may have to pay the high cost to achieve the objectives and loss the corporation and motivation of employees into the business. The synergies that were at first planned also my impossible to attain them. The problems will escalate to the point where it is impossible to resolve them, which can cause a failure of the merger or even the whole enterprise.

2.2 Communication A study which examined the role of employees in mergers and acquisitions, find that

70% of the 413 respondents are of the strong view that involvement of employees into the merger processes is one of the most important matters to consider (Kummer & Stenger, 2008). Lack of communication between human resource personnel within an organisation, as well as the merging firms is one of the areas that, leads to merger failures. Often the non-senior managers and junior employees in particular, are not involved in merger processes (Heaton, 2002).This communication gap mostly causes confusion and lack of certainty as loss of trust will result. In certain times firms even tell lies to the employees by assuring them that, they will continue to perform their usual jobs even though its not true. According Dixon (2008) information gap creates confusion and leads to uncertainty and destructions. Dixon Argued that, its vital that merging firms to be open, consistent and clear, even though the information may not favour everyone.

Merging firms chief executives in certain times in seeking to successfully complete the mergers, attempt to keep some information very confidential so that the value of the companies are not affected at stock exchange. This secrecy causes uncertainty within the entire organisation. Hence, executives are repeatedly starved with the vital information they want to successfully communicate with their employees and plan toward post-merger success (Dixon, 2008). Lack of involving employees in merger processes means that, matters affecting them are far from being properly addressed which in essence has negative effect on merger success.
2.3 Leadership

The success of any merger lies heavily on displaying good leadership on the part of those leading (John C. Bruckman, 2007). In any organisation, the leadership can give instructions on how resources can be utilised. But the leadership cannot compel employees to work in-groups and or use their mind. Certainly this situation has lead to the failure of many mergers and acquisitions. Employees usually resist continuous imposing of authority on them. Where tasks are imposed on them, it might lead to the employees disrespecting their managers, which will eventually create conflicts within an organisation (Kotter, 2007). According to Timothy J. Galpin, (2007) mergers fail due to lack of effective communication. Unclear information from senior executives to all staff in organisation will result in receiving default information. Furthermore, Kotter (2007) opined that it is vital that executives use efficiently their authority in guiding their employees in their jobs rather than attempting to control them. He added that this will motivate them better.

2.4 External consultant and Promoters

Merger promoters used to be consulting firms and investment banks that are heavily relied upon by merging firms. Being they are usually interested in

completing the mergers, they tend to push companies so that they sale their services. By utilising the promoters services, mangers anticipate to decrease the undertaking complexity. However, the roles of Promoters have a signifying influence to the management so that the M&A deal gives meaning and will be effective. However, there is no convincing evidence that promoters are being powerful enough to make mergers a success. Several studies have shown that, promoters frequently fall short of turning merger's deals into successes. The services of Promoters can foster confidence, which will help provide motivation and restore hope all of which are essential reasons for success. Where these qualities are based on experience and competencies, they create the likelihood of future success. However, success becomes unlikely when these qualities are totally unjustified and unwarranted (Timothy J. Galpin, 2007). The other factor why mergers fail is because mangers sometimes do not follow promoters advice too. According to Armstrong (2006) the total capital creation, in addition to the contribution of the merger value accruable to the acquiring firm, enhances as the status of the acquirers promoters increases in relation to that of the acquired (Bruner, 2004). However, overconfidence may emerge from both sides of the promoters and the managers. Often Promoters engages confident university graduates. No doubt, these graduates have obtained outstanding grades but those characteristics do not necessarily guarantee their capabilities to make M&A plans succeed. These selfcentred qualities in these companies do not essentially make the mergers succeed. However, merger promoters deem in themselves and making merger a success which is often based on un-true appraisal. Therefore, it is vital to examine the extent of failure or success of the key players in the merger processes. The most significant objective for promoters is to see that

the contracts are acquired. In their attempt to avoid being blamed for failures, consultants fancy complex mergers. It is surprising however, to observe that firms do not easily change their M&A consultants. A study by Heaton (2002) finds that firms on average pay elevated price to investment-banks where they are dealing with. This is the case even though they could not find any relationship between higher fees and merger success or failure. The study concluded that, firms are more likely to change their consultants if they are not top-tier consultants.

2.4 Over-optimism The other ground for M&A collapse is idealistic outlook. First and for most the process of M&A is very complex but many managers underestimate this fact. Secondly, the goals of M&A deals are often unrealistic. The inertia of organizations and people is underestimated. Resistance shows up and with resistance comes delay. Integration takes time, and it is painstaking. That's where success can be once again spoiled (Chapman, 2004). Although the pace of integration is often regarded as one of the key success factors, ease of integration is misjudged. It is often predicted that the change is faster and easier than realistic (DiGeorgio, 2003). The deep change that is necessary for success is more difficult and much longer than originally anticipated. The changes throughout the post-merger integration projects are often presented only scratching the surface.

Hopes in M&A deals can also exceed what is feasible. Often as a consequence, the amount spent for a target is too high or one of the merging partners is overvalued. Premiums paid can hardly ever be recaptured. Free cash flows are simply wrong. Therefore, when using net present values as the basis for company valuation the acquisition price is overrated. Synergies are also frequently overestimated they look good on paper but are not realized as calculated. Erroneous evaluations can also be produced by the prospective buyer: the acquiring company judges the target with its own (and always different) perspective (Timothy J. Galpin, 2007).

1. The most prominent reason The most prominent reason for merger and acquisition failure is cultural difference merger, Even if two companies seem to have all the right ingredients in place for successful cultural differences can break the deal. It is not enough for two companies to appear to fit well on paper; at the end of the day, if the people are not able to work together, the merger will not succeed. However, despite mounting evidence that culture clashes are at the heart of many failed mergers, managers are not taking enough measures to try to resolve and manage these critical cultural differences. Companies that are merging need to be aware of cultural differences between them and need to find practical ways of reconciling those differences. Companies should consider providing language training to their employees if this can benefit the integration process. Successfully integrating the two cultures of the merging companies is an essential step towards achieving a successful partnership. In order to do this, cultural awareness and sensitivity are crucial to avoid potential clashes and misunderstandings between the people in the two companies.
2. Conclusion

In order merger to be successful there are a lot of factors to be considered, starting with the most difficult role selection of with whom to merge. The cultural difference has to be carefully analysed ahead of time. Communication is also vital for the . Companies should have one common language in order to avoid some workers to feel rejected. It is also important that organisations do effective planning and study on the information and strategies provided by the promoters and external consultant before merging. The leadership should always try to have a good relationship with the employees who are the most

important. Ironically it is the employees who are usually the main factors to the success or failure. Therefore, leaders should try to create a pleasant atmosphere for the workers. In the light of the above foregoing, we have seen the main reasons for the failure of 40% of mergers and acquisitions. Nowadays, we are living in a competitive world where many enterprises are failing due to ineffective planning and also not considering compatibility of their businesses to other organisations. Companies should invest in research and development for the success of their organisations and should set up training programme for the employees. The fact is that due to globalisation, there are always technological improvements. Whether it is big multinational companies or small enterprises, if the above factors (communication, cultural, leadership consultants and overoptimism) are not taken into account, companies are doomed to fail.