Supply Chain Related Hidden Costs as the Factor of the M&A Deals Overvaluation: Airlines Case Study

Abstract

Due to the latest interest to M&A and precisely – to the role of supply chain in M&A, it was interesting to explore whether it had an impact on M&A deal success or failure. Supply chain was expected to be the significant source of hidden costs, undetected at the pre-merger stage, hence – the factor of the deal overvaluation. It was relevant to explore the consequences of the supply chain post-merger disruption, costs related, and the extent of its influence on the total post-merger financial performance in the context of the deviation from M&A plan. For detailed analysis the area of research was narrowed to Airlines industry. According to research results, supply chain is rarely estimated prior to merger, due to the low priority for managers it has. But companies often face to significant post-deal supply chain problems with related costs overrun comparing to their initial expectations. These costs were not projected in advance, but were merger- related. It means that the majority of the M&A deals were initially overestimated. But what is more important, the deal, profitable from the first point of view could harm not just the synergies but the core business of the acquirer.