Mergers and Acquisitions (M&A) are often viewed as a quick route to growth, increased market share, or new capabilities.
Companies pursue M&A deals to become bigger, better, and more competitive in their industries.
The most common ones you’ve heard of:
- Facebook’s acquisition of WhatsApp
- Google’s acquisition of YouTube
- Walmart’s acquisition of Jet.com etc.
Meanwhile, in Saudi Arabia, the average transaction value in the Mergers and Acquisitions market is 187.60m US dollars in 2025.
But while M&A can provide enormous potential for value creation, it also comes with significant risks. In fact, a large percentage of mergers and acquisitions fail. So, why do so many M&A deals go wrong?
And what can you do to avoid the common pitfalls?
Why Mergers and Acquisitions deals fail
#1 Choosing the wrong target company
When a buyer selects a company that doesn’t align with their strategic goals, the entire transaction can collapse or underperform.
Unfortunately, the lack of strategic rationale behind an acquisition often becomes clear during the integration phase, revealing the true costs of poor decision-making.
Because, it’s not enough for a target company to simply be financially appealing…there must be a clear strategic rationale.
This means the company should fill a gap in the buyer’s operations, Probably through technological advancements? Market expansion? Operational efficiencies? Or access to new customer bases.
For example, let’s say a tech company buys a retail chain because it looks like a good financial deal, but there’s no strategic fit.
If the retail company’s operations require significant technological upgrades.
The tech company doesn’t have the infrastructure or expertise to handle that.
Then the acquisition becomes a mismatch.
#2 A poorly structured deal
Even when the target is a good strategic fit, a poorly structured deal can lead to failure.
This category includes issues such as overpaying for the target, failing to conduct proper due diligence, having bad timing, or not securing the necessary contractual protections to mitigate risks.
For example, HP acquired Autonomy for $11.7 billion for its software division. But, post-acquisition, HP discovered accounting irregularities, leading to an $8.8 billion writedown and extensive legal disputes.
Overpaying is a common pitfall in M&A transactions, especially in competitive bidding scenarios.
Buyers often feel pressure to secure the deal, which can lead them to offer more than the target is truly worth or without doing proper due diligence first.
This can happen for a number of reasons:
- inflated projections of future synergies,
- overestimating the value of the target’s customer base,
- or simply outbidding other buyers without assessing the true value.
Unfortunately, overpaying for an acquisition doesn’t leave much room for maneuvering if the integration process doesn’t go as planned.
#3 Poor timing
Timing is everything in Mergers and Acquisitions, and often, deals fall through because the market conditions or internal company factors aren’t right.
A company might acquire another business during an economic downturn when market growth is stagnating, or when internal operations aren’t strong enough to support the integration.
If the timing doesn’t align with the strategic goals of the company, the potential benefits of the deal might not be realized for years, and the company could end up bleeding cash in the meantime.
For example, in the US, many big bank mergers have slowed in 2025 due to market volatility and economic uncertainty as Reuters reports.
Also.. external factors (changing regulatory environments, competitor actions, unexpected shifts in consumer behavior) can impact the deal’s viability.
#4 Wrong execution
Execution is where Mergers and Acquisitions deals often fail (even if the target is right) the deal is well-structured, and the business rationale makes sense.
Integration (AKA the process of combining two businesses) is the real test. If this phase isn’t handled correctly, all the potential value created in the earlier stages of the deal can evaporate.
M&A integration often involves merging systems, processes, and operations that can be drastically different. If a buyer doesn’t manage this carefully, the results can be costly inefficiencies.
Merging departments, aligning product lines, and consolidating functions like HR, IT, and finance. All of these operations need careful planning and seamless execution to avoid disruption.
In many cases, companies expect synergies from the merger, such as cost savings, operational efficiencies, or increased revenue opportunities.
But poor integration can prevent these synergies from being realized, which means the potential benefits of the acquisition don’t come to fruition.
Sometimes, synergies are overestimated in the deal phase, leading to inflated expectations.
Other times, the problems arise during the execution phase when there isn’t enough focus or skill to capitalize on these synergies.
Without a detailed plan for realizing these synergies, the deal might not achieve the projected results.
Integration costs can end up exceeding savings, and the buyer might find themselves losing money instead of making it.
#5 Lack of contractual protections
M&A agreements should be structured to protect both parties in case the deal doesn’t go as planned.
If contractual protections (clear exit strategies, contingency clauses, or performance-based adjustments) are not properly negotiated, both the buyer and seller might face unexpected financial risks.
A poorly drafted contract can and will result in the inability to enforce key terms or leave the acquirer vulnerable to potential liabilities.
Without these protections, problems with the target company might only come to light after the deal is sealed, leading to costly consequences.
Financial misstatements or unforeseen liabilities are dreadful in every case.
Final thoughts
Mergers and acquisitions can be an incredibly powerful strategy for growth, but they are fraught with risks.
It’s important to ensure the target company is the right strategic fit, that the deal structure is sound, and that the execution phase is handled with care and precision.
The companies that succeed in M&A are those that plan very, very carefully, execute flawlessly, and adapt to challenges as they arise.
The key takeaway is that M&A isn’t just about expanding for the sake of growth but about creating value that lasts.