Corporate Merger
Most corporate "mergers" tend to be euphemisms for the acquisition of one company by another. And when corporate mergers are announced, the share price of the acquiring company drops in 80% of the cases after such announcements.
Why does the acquiring company's share price drop after about 80% of corporate merger announcements?
It's because about 80% of the corporate mergers fail or fail to get a good price for the acquiring company. Why?
Some corporate mergers fail due to poor post-merger integration. Key people leave, often taking key clients with them, the corporate cultures don't match, etc. And post-merger integration problems usually result from poor pre-merger due diligence and planning. Managing corporate mergers is an art that few companies truly master.
Other corporate mergers fail because they are badly conceived and never really had a chance of succeeding in the first place. For example, when one company in a fragmented industry buys another, it often triggers a wave of corporate mergers among the remaining players. Nobody wants to be left out and CEOs act like high school kids in need of prom dates.
Still other corporate mergers fail because they are driven by egos. A CEO running the #2 company in an industry, for example, thinks his company won't be #1 before he retires. So he proposes a merger to the CEO of the #4 company, so that he can retire on top and hand off the new #1 company to the other CEO, who can then take his turn to retire on top. The egos of CEOs play at least a part in many if not most mergers.
Of course, they can't tell that to the rest of the world. So they pay a couple of million dollars to McKinsey to come up with some justification about synergies, etc. that paints the merger as a strategic match made in heaven.