What is the predominant cause of falling stock value in 60 percent of mergers and acquisitions?

The predominant cause of falling stock value in 60 percent of mergers and acquisitions is often linked to the acquiring firm underestimating risks associated with merging IT infrastructures. Merging different organizations involves integrating various technological systems, which can be highly complex and fraught with challenges. The IT infrastructure might include differing software platforms, hardware configurations, data management practices, and operational procedures.

When an acquiring firm fails to accurately assess these risks, it might overlook potential difficulties such as data incompatibility, system outages, or the costs involved in retraining staff and upgrading systems. These underestimations can lead to delays in achieving projected synergies and ultimately impact the overall performance and profitability of the merged entity. As investor confidence wanes due to these unforeseen issues, the stock value tends to decline.

In contrast, the other options touch on factors that might contribute to challenges in mergers and acquisitions but do not address the overarching issue of risk assessment and integration planning that leads to significant financial repercussions. For instance, while outdated systems and incompatible IT systems can certainly pose problems, they are often manifestations of the more profound issue of risk underestimation rather than standalone causes. Similarly, building entirely new systems may represent a strategy for some firms, but it does not typically reflect the predominant financial