Here’s Why 7 Out of 10 Mergers Fail

Hey, it’s David

I recently had a conversation with a CEO who was lamenting over dealing with the fallout of his company’s failed merger with a competitor. He said no one at either company ever considered the merger wasn’t a good idea and truly never contemplated it would be a total failure.

…What are the odds this plane crashes?

However, companies spend more than $2 trillion on acquisitions every year, yet the M&A failure rate approaches 70% by most estimates!! Most of the academic analysis points to roughly 12 key issues in that cause M&A failures.

Today, I’ll tackle just a few of those and what I’d refer to as the “horsemen” of M&A failure - the key pitfalls in M&A deals.

1. Value Destruction. On paper, acquiring a company or merging two organizations can seem logical, even strategic. But one of the biggest risks is getting swept up in the narrative. Overpaying for a company or misunderstanding the market can lead to massive failure. The antidote? Focus on details over the story, scrutinize every assumption, every number, every nuance.

2. Unrealistic expectations. Mergers fail when expectations aren’t aligned. Two companies often approach integration with conflicting visions for what the “new” entity will look like. These mismatched goals create tension and conflict, derailing success before it even begins.

3. Lack of communication. Communication is the lifeblood of successful integrations. Managers on both sides must actively champion post-integration milestones and ensure transparency at every step. If customers or employees perceive management as detached or out of touch, the deal’s credibility… and success… erodes.

4. Overpaying. Research analyzing 2,500 deals between 2016 and 2020 found that larger transactions are more likely to fail. Mixed deals, those involving cash and stock, also tend to underperform. Overpayment compounds these risks, leaving little margin for error post-close.

5. Poor integration process. Integration isn’t just a checklist, it’s the foundation for long-term success. Many companies neglect to plan properly, leading to disconnected entities that can’t function as one. Common culprits include culture clashes, poor planning, and unrealistic expectations. If integration issues aren’t addressed pre-merger, failure becomes almost inevitable.

6. Misunderstanding the company. Misjudging the other company’s culture, values, or goals is a silent killer of mergers. Without deep due diligence, leaders risk underestimating cultural differences or ignoring how misaligned working styles will create friction. Employees feel the brunt of this misalignment, which breeds conflict and threatens the merger’s long-term viability.

Final Thoughts

M&A failures often come down to the basics…

These aren’t small missteps; they’re the kinds of things that derail even the most promising deals. If you want to avoid being part of the 70% failure rate, focus on clear communication, realistic expectations, and thorough preparation. The best mergers happen when both sides take the time to align on goals, culture, and strategy. It’s not just about sealing the deal, it’s about making sure it actually works.

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David