Marcia's Leadership Q and As: Will Your M&A Deal Fail or Succeed?

Q. Our Board and leadership teams have just committed to doing more M&A deals in future years. How can we be successful?

A. .  Merger and Acquisition deals are fairly common whether for a Fortune 50 corporation or for small private companies as they consolidate. There are multiple reasons for acquiring other corporations: to expand the technology, products, and new regions and marketplaces; and, to rapidly add employees (often in highly technical careers, specific industry knowledge, better access to customers, or marketing and sales connections.)

Corporations have internal M&A teams or hire CPA & legal firms with this specialized expertise. When corporations are identified to acquire or merge with, these teams do their due diligence: assessing their industry/product fit; and their financial and legal ramifications. There are multiple steps in the process for the team to ask, “Does it make sense to proceed?” But these answers take courage to discuss, debate, and let go of a deal that doesn’t make sense. Also, the deal might make financial sense, especially for the executives involved who will reap phenomenal benefits.

But as many studies have proved, 70 percent to 90 percent of acquisitions fail. Why? And if you want to acquire another corporation and merge, what can you do to succeed that most executives obviously aren’t doing?

The focus and decisions about doing an M&A deal are mentioned above. But why they fail is because executives are only leading part of the job. Financial, legal, and even market/product due diligence is not enough. Those are only a small part of what’s needed to succeed.

The essential and most often missing part of the M&A deal process to be successful is the lack of due diligence and the development of an Integration Plan before the M&A deal is signed! There needs to be due diligence for leadership, communication, culture, decision-making, speed of decisions, customer experiences and relationships, commitment of Quality and responsive service, etc. This process provides critical information to the boards and executives about whether and how to proceed and succeed. With this information, a framework and plan to create and integrate a new System that can deliver successful results and a new collaborative culture, is possible. Without it, M&A deals will continue to deliver a high rate of failure.