Merger and acquisition (M&A) deals can be highly complex, with hundreds, if not thousands, of moving pieces. So it shouldn’t be a surprise that many promising deals end up falling apart. This is especially true for acquisitions, where between 70% to 90% of deals fail. But why do some deals deteriorate while others succeed? And, more importantly, how can you ensure that your deal doesn’t fall apart at the last minute?
This article will break down some of the most common reasons why M&A deals don’t cross the finish line. However, the best way to ensure your deal’s success is by working directly with a team of M&A experts who can guide you through the complex stages of the transaction.
Downsides of a Failed Deal
An M&A deal falling apart is unideal for three main reasons:
- Reputational Damage: A failed transaction can reflect poorly on the executives involved, potentially raising doubts about leadership judgment or strategic clarity. It may also hinder future deal-making opportunities for both companies by signaling instability or misalignment.
- Disrupted Business Operations: The intense focus required during deal preparation often diverts attention from core initiatives, delaying product launches, slowing growth, and creating internal uncertainty. If the deal collapses, that lost time can provide a competitive edge to others in the market.
- Wasted Resources: Even preliminary M&A discussions demand substantial investments in legal counsel, financial advisors, and internal bandwidth. When a deal fails, those costs become sunk expenses with no strategic return.
Let’s explore the five most common reasons why M&A deals fall through.
5 Reasons Why Deals Fail
Being Too Ambitious
Business leaders, especially entrepreneurs, are natural risk takers who often like to take big risks in search of big rewards. After all, you can’t hit a home run without swinging for the fences. However, this can be a drawback in M&A as pursuing larger M&A deals carries significantly higher risk.
According to Fintalent, transactions over €10 billion are twice as likely to fail compared to those under €5 billion. As deal size increases, so do the complexities, making it more likely that something will go wrong or that regulatory scrutiny will delay or derail the transaction.
Mismatched Values
Despite frequent discussions around synergies and strategic fit, most M&A deals ultimately come down to one core factor: money. The target company aims to sell for the highest possible price, while the acquirer seeks a deal that will drive growth or eliminate a rival.
This dynamic naturally creates tension and opens the door to scenarios where the interests of both sides may not fully align and could fall through as the deal proceeds.
Failing to Retain Key Personnel
In most M&A transactions, attention tends to center on the CEO, founder, and other top executives. However, many mid-level and frontline employees also play critical roles in the company’s success. Overlooking these key contributors, or failing to keep them engaged and committed, can significantly undermine the deal’s success.
Poor Post-Merger Integration
Most companies pursuing an M&A deal spend the bulk of their time focusing on pre-deal work like target search, due diligence, and valuation methods. Comparatively, data shows that less than 40% of companies have a standardized approach to an equally important part of the deal: post-merger integration (PMI).
Post-merger integration is the process of ensuring that two or more merged companies work together successfully so that the new entity lives up to the expectations of the M&A deal. It’s a make-or-break phase that often doesn’t receive the attention it deserves.
Learn More: How to Navigate Post-Merger Integration: Strategies for Success
Dishonesty
As noted earlier, some sellers are primarily motivated by financial gain and may prioritize the highest bidder over the most strategically aligned partner. In mild cases, this incentive could lead to sellers making exaggerated growth projections. In extreme cases, it could lead to intentional misrepresentation.
While it’s tempting to trust that the other party has your best interests in mind, it’s highly important to engage experienced professionals who can conduct thorough due diligence and uncover any red flags before the deal closes. As the saying goes: Trust, but verify.
3 Ways to Avoid Failure
Keep the Regulatory and Political Environment in Mind
Politicians and regulators may intervene in a deal for a variety of reasons, including national security, economic stability, or environmental impact. This scrutiny is particularly common for large corporations that influence local economies or for companies operating in sensitive sectors such as cybersecurity, artificial intelligence, or defense.
Anticipating regulatory concerns early in the process allows dealmakers to proactively address potential obstacles and better navigate approval hurdles down the line.
Ensure Total Alignment
Misaligned goals, whether around valuation, integration plans, or cultural fit, can lead to post-deal friction, stalled synergies, and even deal collapse.
Clear communication, mutual trust, and shared expectations help reduce misunderstandings and set the foundation for a smooth transition. Ultimately, alignment creates the conditions necessary for long-term value creation on both sides of the table.
Work With a Team of M&A Professionals
One of the best ways to avoid a deal potentially failing is by working with an M&A advisory firm.
Advisors bring deep industry knowledge, negotiation expertise, and a clear-eyed perspective that helps both parties navigate complex deal dynamics. They conduct thorough due diligence to uncover hidden risks, validate financial assumptions, ensure regulatory compliance, and, for sellers, can help craft compelling equity stories.
Advisors also help structure the deal in a way that aligns with each party’s strategic goals while minimizing potential pitfalls. Most importantly, they act as trusted intermediaries, helping to manage tensions, maintain momentum, and keep the deal on track from initial discussions to post-close integration.
If you’re planning to pursue a merger or acquisition and want to do everything possible to ensure its success, then please contact the team at Acquinox Advisors today. We specialize in providing cutting-edge M&A advisory services with a strong focus on the rapidly evolving technology sector.
We hope that you’ve found this article valuable when it comes to learning why most M&A deals fail – thanks for reading!
