The prospect of doubling a business in size overnight is tempting, but M&A deals rarely go as smoothly as anticipated. So when is M&A truly the right decision? How do you ensure that you’re among the 10-30% of companies that successfully integrate acquisitions?
To answer this, we need to look beyond the usual “M&A is good for growth” narrative and dig into the true factors that make or break such transactions.
Obviously, you alread know that success lies in preparing for, executing, and following through on some key strategic elements.
What’s needed for M&A deals to be successful?
1. Strong core business
M&A is often seen as the solution for quick growth, expansion, or diversifying a business. BUT you can’t use M&A to fix a broken business model!
If your core business is already unstable or struggling, adding another layer through M&A is not the answer.
Why?
Because during an acquisition, you’re pulling in resources from your company to focus on the deal, and that means your core business can easily take a backseat.
The most successful M&As are those where the core business is solid and (more importantly) can withstand the pressures that come with acquisition.
Make sure you have a reliable management team, not just for executing the deal but for ensuring the company stays on track during the transition period.
If leadership is scattered or distracted, the deal will collapse under the weight of internal confusion and dysfunction.
If problems arise (and they inevitably will), your leadership team needs to focus on solving them, not fighting among themselves. A fragmented team will derail the entire effort.
2. Due diligence
Before making any move, businesses need to work through a deep due diligence process. This is where a lot of risk can be mitigated, and the foundation for the deal is built.
The more certain you are about the assumptions underlying the deal, the stronger your acquisition case will be. And the only way to be certain is through due diligence.
This involves going deep into the financials, operations, customer base, and overall health of the company you’re acquiring. If you don’t fully understand what you’re buying, you could easily end up overpaying or taking on hidden liabilities that could sink your business.
Building a solid case means not just understanding the financials but also understanding how the acquisition will drive long-term value. What are the synergies between the two companies? How does the acquisition align with your strategic goals?
We’re going to be upfront: These aren’t simple questions to answer, but they are very important to be given an answer.
That’s how you can be sure the deal is the right one.
It’s also important to be realistic.
Not every acquisition is a perfect fit, and sometimes it’s better to pass on a deal than to rush into it. Making the right call at this stage can save you from the trouble of trying to fix an acquisition that was never right to begin with.
3. An efficient team
A common misconception in M&A is the idea of a “win-win” deal, where both parties walk away satisfied.
In reality, M&A transactions are often more competitive than collaborative.
So, the goal is not to make both sides happy but to ensure that you’re getting the best possible value for your company.
Negotiation is key in this phase.
Each dollar you save or gain in the deal process can have a significant impact on the overall value of the transaction.
That’s why having an experienced team who really understands the nuances of negotiation is essential for getting the best terms, both in the immediate deal and for the long-term success of the integration.
Also, M&A is a high-stakes game, and there’s no room for error. A team that is inexperienced or unfocused can quickly run into problems, missing key opportunities or misvaluing aspects of the deal.
For example, in 2005 Sprint and Nextel merged in a $35 billion deal but failed due to incompatible technology platforms and different customer bases.
Or when the merger between Microsoft and aQuantive (2007) failed due to a lack of strategic integration.
That’s why the team needs to be agile, expert-driven, and focused on execution. If the team is bloated or inefficient, the value of the deal could quickly disappear.
4. After the deal is done
The integration phase is where the rubber hits the road.
It’s where the potential value of the acquisition starts to materialize (or get lost.)
And it’s where most acquisitions go wrong. Because it’s not enough to simply plan for integration, you need to execute it with excellence.
Many companies fail here because they put all their energy into securing the deal and forget that the real challenge is in integrating the new company into the existing business (as we mentioned before.)
And let’s not forget: integration isn’t just about systems or structures. It’s about managing culture, aligning goals, and getting both teams on the same page.
Many acquisitions fail because the companies involved fail to merge their cultures effectively (like when Daimler-Benz merged with Chrysler), causing friction that hinders growth.
Cultural integration is a particularly tricky aspect of M&A.
Because even when the financials work out, if the cultures don’t align, you risk employee dissatisfaction, loss of talent, and internal conflict.
Final thoughts
The hardest part of M&A isn’t pulling the trigger- it’s knowing when to pass.
Because executives often get caught up in the rush of a good deal, but if it doesn’t fit with your business’ core strategy, it’s not the right time. Even if the numbers are right, the culture is right, and everything seems aligned, you still need to ask yourself:
- Can we truly execute this?
- Do we have the leadership in place to handle the integration?
If the answer is no, then the best move is to step back.
There will always be opportunities, deals, and offers that seem perfect. But if you’re not in the right position to execute the deal then it’s better to walk away.