Stacking the Deck for M&A Failure

 

Is This the Hand You Want to Have?
By Jack Prouty, President of the M&A Leadership Council

It is considered a given that deal-makers want to achieve M&A success, but occasionally I witness behavior that challenges this assumption. I so often write articles about how to be successful; however, it is also important to think about what brings you to failure.

Inexperience coupled with bad decisions – from all outward appearances, the desired result is failure. While I cannot guarantee that your acquisition will be an abject failure, if you follow these essential steps, you can significantly raise the likelihood that a botched deal is on the horizon. At the very least, you should achieve large value erosion; higher acquisition and integration costs; employee and customer loss; and poor M&A performance.

Note that sometimes, despite your best efforts, someone or some factor may intercede to prevent the full magnitude of failure, but the recommended actions below will minimize these from happening. You may need to do more than just a couple to create total deal failure, though they will move you closer to your goal.

Actions to Achieve M&A Failure:

  • Delay changes until 6 months after Close.
  • Acquire a company with no business fit.
  • Ignore “red flags” during diligence.
  • Lack of management commitment to make the deal work.
  • Staff the effort with unqualified, untrained personnel.
  • Give carte blanche to acquired executives to run the business as is.
  • Launch functional teams without a plan or infrastructure.
  • Approach it as an IT/ERP integration rather than a business integration.
  • Ignore people and cultural issues.
  • Install a “cone of silence” with stakeholders: poor or no communication.
  • Don’t go after synergies or establish metrics.
  • Lack of accountability and rigor.

Focus on the above actions if you want to stack the deck for M&A failure. But understand that you have intense competition from others who are also committed to sub-optimizing the business benefits of acquisitions.

But if failure is NOT your goal, consider sending your M&A team to train with us during the upcoming year. We have several programs coming up that will hit the topics that you will be facing. Our most popular one is  The Art of M&A IntegrationSM, which covers critical topics throughout the integration lifecycle and is presented by experienced M&A professionals.