[Dale DegParticipant]

Assuming that a merger or acquisition is completed, please list the top three reasons you believe that M&As are not successful in achieving the intended goal(s)? If possible, rank them and provided a brief explanation.

[Milos RexParticipant]

From personal experience and from what I have heard from fellow colleagues, I believe there are two main reasons for unsuccessful M&A.
The first one is related to the very first stage of the M&A process, prior to merging and acquiring and that is the development of M&A strategy and choosing candidates for M&A. At this stage, leaders and strategists determine the high-level goals for the firm and what they seek to gain from this transaction, such as increasing share in their current market or expanding to new ones. It can happen that the very strategy they aimed for from the begining wasn’t well defined or wasn’t profitable, and therefore the whole process can end up being unsuccessful. If valuation analysis isn’t done properly it could simply lead to choosing the wrong candidate for the M&A.

The second reason, is due diligence, as highlighted here https://dealroom.net/faq/what-is-m-a-process-everything-you-need-to-know Not conducting due diligence properly can result in unsuccessful M&A because the Once an offer with the final candidate is on the table, the acquirer must conduct due diligence. If they don’t carefully examine, evaluate, and analyze all aspects of the target company’s operations and financial position prior to establishing a definitive agreement and there happen to be important threats for the future of the M&A deal with that candidate, the whole deal can result in failure after a process is already completed.

[Chris KingParticipant]

1) Overvaluation. Overly optimistic assumptions used in the valuation process. Either in the form of overly optimistic cash flows or a willingness to pay to high a multiple for perceived synergies that never materialize.

2) Cultural / Operational differences that were not adequately researched/identified in the due diligence process. Moral is easily eroded in the acquired company if management does not get on board early to communicate with managers of the acquired company.

3) Lack of planning and strategy for the after closing operations of the combined entities. To much focus is put on getting the deal done with not enough emphasis on how things are going to play out after the close date.

[Lina LorenzoParticipant]

1 – Poor due diligence
2 – Failure to account for Culture and compatibility of cultures
3 – Integration is not informed by good due diligence

[Cheryl TaylorParticipant]

1. Combining incompatible cultures
2. Poor leadership governance
3. Placement of resources on the integration team with no significant experience with Project Management and Risk Mitigation

[Corynne PierceParticipant]

I believe most folks have covered the top three. One thing I would like to add in is that I often see scope creep when moving into Integration. The financial model created in due diligence is a great starting point but once we bring in additional leaders, they often want to do much more (for instance enhancing the new companies product) that was not originally scoped in the model and requires added resources and cost.

[Author]

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