Why 90% of Mergers and Acquisitions Fail - And How to Beat the Odds
*While M&A deals promise rewards, 50-90% fail to achieve expected value-especially for mid-sized companies.*
*ATLANTA, GA / ACCESSWIRE / July 7, 2023 / *Mergers and acquisitions have long fascinated the popular imagination. Blockbusters like Wall Street and Pretty Woman dramatize the glamour and intrigue of high-stakes deals. While M&A deals are often seen as a fast track to growth, the reality is starkly different. According to multiple studies, 50-90% of mergers and acquisitions fail to achieve the expected value. For mid-sized companies, the failure rate is on the higher end of that range, primarily due to a lack of planning and expertise.
For smaller corporations, M&A deals are rarely a priority or area of focus. Management teams often default to handling them as a part-time responsibility on top of their normal jobs, not unlike Richard Gere's businessman character in Pretty Woman reviewing acquisitions between polo matches and cocktail parties. This lack of dedicated resources and expertise dooms many mid-sized transactions from the start. Companies review a handful of potential deals instead of casting a wide net, and they lack the skills to properly evaluate targets or integrate deals after closing.
The consequences of failed M&A are severe, from loss of shareholder value to company break-ups that would make Gordon Gekko shudder. Employees, customers, and communities also suffer through disruption, power struggles, and culture clashes like those in NBC's The Office. Despite the risks, mid-sized companies continue to pursue mergers and acquisitions as a shortcut to expansion, often learning too late that there are no shortcuts. Success depends on rigorous planning, evaluation, and follow-through that rivals Bud Fox's preparation for takeovers in Wall Street.
For mid-sized companies, the solution lies in seeking outside expertise to supplement internal resources. M&A advisors provide the necessary experience and bandwidth to run a deal successfully from start to finish. By reviewing a high volume of potential targets, securing the best options, and facilitating integration, advisors shoulder the burden so management can focus on business as usual. They also ensure each step of the process gets the dedicated attention required to avoid becoming a flashy headline or cautionary tale.
With the support of skilled advisors, mid-sized companies can overcome the perils of inadequate planning and stand a true chance at deal success. Advisors like Alok Gupta align organizations around a shared vision, evaluate hundreds of potential deals to choose the select few with the highest value potential and manage rigorous due diligence to turn that potential into reality. Most importantly, they handle the entire process so overtaxed internal teams don't have to. Gupta aligns the ownership and executive team on a centralized plan, approach, and structure, and does the heavy lifting of reviewing numerous companies to conduct valuation and lead the entire process so they are able to focus on their BAU (business as usual). These organizations also review a larger number of deal flows to ensure the ones that move forward have the potential to provide the most value and return to the business.
For many mid-sized companies, mergers and acquisitions represent unparalleled opportunities for growth and competitive advantage. But opportunity only realizes its value through excellent execution. M&A deals demand a specialized skill set and dedicated focus few mid-sized companies can afford to develop and maintain internally. By leveraging external experts, leadership teams ensure they get the most from each deal- and avoid becoming another statistic. Like Bud Fox, they learn to do their homework before chasing the next big deal thrill.
While the challenges of M&A integration for mid-sized companies are formidable, solutions need not be complicated. Success simply requires recognizing one's limitations and seeking partners to supplement expertise and share the load, as Gordon Gekko ultimately learned to his peril. For leaders pursuing transformational growth, there may be no wiser investment than advisory support to guide deals from start to finish-and ensure they achieve the rewards they were designed to reap. When handled properly, the high risks of M&A pay off through high rewards. The difference lies within the handling.
For many mid-sized companies, good advice spells the difference between a deal's life or death. Thankfully, help has never been more within reach. The rest remains up to leadership's will to accept it, orchestrate their own big deals, and make M&A history just like on the big screen.
*ABOUT*
Loki Group, Inc. is a consulting firm focused on delivering Corporate Strategy as a Service (CSaaS), M&A/carve-outs/transactions, transformation, and value creation projects for small and middle market companies. We work alongside the owners and executive leadership to guide and coach their management team in their growth. To learn more, visit www.loki.group. For additional information, visit Loki Group Inc. on Twitter and LinkedIn.
*CONTACT*
Alok Gupta
678-358-3330
alok.gupta@lokiequity.com
*SOURCE:* Loki Group, Inc.
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