The Real Reasons Most M&A Deals Fail

M&A Risk


Here’s an alarming statistic to be aware of if you’re planning a merger or acquisition (M&A) in a new market, especially if it’s overseas, the failure rate is between 70% and 90%.

Companies spend more than $2 trillion on acquisitions every year, yet the M&A failure rate is extremely high.

It’s quite a shocking number when you think about it. Even more so when you consider that even if an M&A does go through, most businesses could still lose millions in a deal’s value because they fail to conduct proper due diligence before the deal is closed. While most companies conduct legal and financial due diligence they often fail to conduct due diligence on the people behind the target company, they often have little to no on-the-ground business intelligence on the company to be acquired, and even less information regarding political and economic conditions in the region the company is either based in or has key operations in.

So ask yourself… Do you have a full understanding of the potential geopolitical and economic risks involved in your merger or acquisition? Do you have a plan to navigate these risks when they inevitably occur?

If not and your company is preparing to merge or acquire another business, you need to do your due diligence on the other company. Has anyone performed enhanced due diligence on the executive team of your new company besides cursory background checks? Are there sanctions on the vendors or subcontractors the company uses in different countries? Is there any hidden information that could seriously jeopardize the outcome of your proposed business transaction?

You need to be able to answer all of these questions and more before you go through with any purchase or merger. Otherwise you risk irreparably damaging your own brand’s reputation if you acquire a company that has a history of illegal activities such as fraud or bribery.

If you buy a company and only find out later that they’re embattled in lawsuits or government inquiries, you can end up spending millions more on your M&A deal. Or you might find out they have not properly disclosed everything about their financials and are trying to hide significant losses or payments to less than reputable vendors or business partners. The same goes for the vendors and subsidiaries the company works with, who could also be operating legally or may not have disclosed everything.

It’s vital that you know exactly what risks you’re assuming by completing your M&A deal. Infortal can help you learn who you’re really acquiring or merging with by conducting business intelligence and doing deep dive due diligence into the executives, so you can better understand the current and future landscape as well as the history of the business you’re joining or buying. That way you’ll be going into the deal with your eyes open.

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