This is the risk that the firm or organization is impacted or suffers loss as a result of a merger, acquisition, or other major corporate transaction that the organization undertakes. This risk may be due to one or more of the following:
- Paying a price that cannot be recouped from future earnings, synergies or other benefits, and requires a write down in the carrying value of the businesses or assets acquired in the short or medium term;
- Acquiring businesses or assets that do not subsequently prove to be of the value paid due to additional information subsequently obtained or the result of a detailed review of the businesses or assets, after the transaction is concluded;
- Failure to successfully integrate or otherwise manage the businesses or assets acquired; or
- Departures of key personnel after the businesses or assets are acquired.