Which of the following factors is most likely a reason for the failure of a merger or acquisition?

• A. Strong synergies realized between the firms
• B. Immediate increase in market share
• C. A low Herfindahl-Hirschman Index (HHI) after the merger
• D. Cultural differences between merging firms

Answer: (D)

Verified step by step guidance

1. Understand the context of mergers and acquisitions (M&A), which are strategic moves where two firms combine to achieve benefits such as increased market share, cost savings, or synergies.
2. Recognize that successful mergers often depend on both quantitative factors (like market share and Herfindahl-Hirschman Index, which measures market concentration) and qualitative factors (such as organizational culture).
3. Analyze why strong synergies and immediate market share increases are generally positive outcomes that support merger success rather than failure.
4. Understand that a low Herfindahl-Hirschman Index (HHI) after a merger indicates low market concentration, which usually reduces regulatory concerns and is not a cause of failure.
5. Identify that cultural differences between merging firms can create integration problems, reduce cooperation, and lead to failure despite positive financial or market indicators.