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Top 5 Reasons of M&A Integration Failures & How to Prevent Them

Top 5 Reasons of M&A Integration Failures & How to Prevent Them

Show Notes Of Podcast

Why M&A Integration Failed

  1. Lack Of Big Picture Alignment
  2. Poor Planning
  3. Poor Execution Of The Integration
  4. Poorly Executed Due Diligence
  5. Cultural Issues

There are a number of reasons why M&A deals and M&A integrations fail, and educating yourself and your team on why they fail can help prevent this from happening or at least from happening as frequently. We hope this guide will help you grasp some of the primary reasons and make you more knowledgeable on how to mitigate some of the M&A risks.

There are so many reasons why M&A integrations can fail, from inaccurate data, insufficient involvement by top tier leadership, limitations on resources, lack of long term planning, and a host of many others. There are too many reasons to list in this article.

We have thoroughly combed the list, and below we have selected the top 5 reasons why M&A integrations fail hard.

There are a number of reasons why M&A deals and M&A integrations fail, and educating yourself and your team on why they fail can help prevent this from happening or at least from happening as frequently. We hope this guide will help you grasp some of the primary reasons and make you more knowledgeable on how to mitigate some of the M&A risks.

There are so many reasons why M&A integrations can fail, from inaccurate data, insufficient involvement by top tier leadership, limitations on resources, lack of long term planning, and a host of many others. There are too many reasons to list in this article.

We have thoroughly combed the list, and below we have selected the top 5 reasons why M&A integrations fail hard.

Why M&A Integration Failed

  1. Lack Of Big Picture Alignment
  2. Poor Planning
  3. Poor Execution Of The Integration
  4. Poorly Executed Due Diligence
  5. Cultural Issues

1. Lack Of Big Picture Alignment 

Lack of big picture alignment and thoughtfulness about the long term strategy of your organization can lead to a host of problems down the road, well after the dust has settled from your M&A deal and M&A integration has begun.  

A well thought-out and coherent M&A strategy needs to be established for your organization to ensure all of the parts, especially newly acquired one, work together to improve and enhance the overall organization. Focusing on closing the deal alone without properly planning what happens afterward can lead to a host of issues during the integration of the new acquisition.

When deals are in progress and even in the final stages of completion, the focus is often on the external. Questions such as how to quickly gain more market share and be afforded new opportunities to increase revenue are prevalent. 

However, once the deal happens, the focus quickly turns to the internal. Questions such as how we integrate multiple payroll systems and who from which team is doing what are abound.

What should you do?

To decrease the chances of this failure, your team needs the ability to focus not only on the immediate benefits of the acquisition and the “external factors,” but a lot of thought should be given to the internal as well. How will we integrate in a thoughtful and strategic manner to ensure business continuity for the newly merged entities?

Read also "How to Create M&A Integration Strategies Suited for Modern Day Business Environments"

2. Poor Planning

A second reason why M&A integrations fail, and potentially the leading reason, is due to poor planning. Whether planning is excellent or poor can literally make or break an M&A integration. While the best of intentions are often the focus in any M&A integration, looking at the deal through rose colored glasses can lead to significant issues down the road, long after the deal has been completed.

Poor planning for post-deal issues isn’t simply limited to the integration of the new entities; in fact, poor planning can apply to:

  • revenue projections
  • market factors
  • cultural factor
  • and lots of other areas

However, poor planning regarding the M&A integration is one that can be easily mitigated with proper planning yet tends to be one of the most overlooked factors in terms of why M&A integrations fail.

Often, there can be a disconnect between company development teams and deal integration teams. Main deals fail to integrate well due to failure to bridge this gap. Many business development professionals tens to have experience in investment banking and are primarily interested in the potential financial upside. However, often these teams fail to communicate properly with the teams that will be integrating the two companies on a day-to-day basis long after the deal has been completed.

What should you do?

Thus, proper planning should be performed not only on the financial side of things, but on the day-to-day operations side of the equation as well. The day to day operations of the newly formed entity affect everything from team collaboration to the bottom line, so ensure you enact as much planning as possible for as many different possible scenarios as possible to ensure a good M&A integration and efficient team collaboration.

Read also "Developing Effective Integration Strategies for Modern Business Landscapes"

integration planning

3. Poor Execution Of The Integration

Another top reason why M&A integrations fail hard is due to poor execution of the integration. A poorly planned or executed integration can severely reduce the value of the M&A deal, if not remove the value entirely.  

Poor execution of the M&A deal integration can be avoided by collaborating with a connected and informed team, an informed team that not only includes the people working on the deal but also the individuals responsible for the integration after the deal has been completed.

Too often, integrations of M&A deals are performed by loosely connected groups, with a mass of data and lack of meetings to discuss the entire scope of the deal, from the financial goals to the integration afterwards. How will different teams, systems and ways of doing things function after the deal is completed to ensure business continuity and smooth operations?

What should you do?

All integration plans should be carefully crafted and mapped out, and the responsibilities of everyone involved post-deal should be very clearly outlined to maximize the success of the deal and the success of the teams responsible for executing the day to day operations of the newly formed entity.

integration process

4. Poorly Executed Due Diligence

Poorly executed due diligence is another top reason why M&A integrations fail hard. When the organization’s leadership pushes through a deal without performing the necessary due diligence measures, a deal that looks promising can lead to failure pretty quickly.  

Deals can also occur without properly executed due diligence when teams become too overconfident in the merits of the deal without performing adequate research and oversight to optimize the deal’s chances for success post deal.

What should you do?

Due diligence is of the utmost importance, as it will unveil a host of potential issues and highlight the inner-workings of the organization being acquired so issues can be flagged, evaluated and worked through. Don’t overlook or minimize this enormously important step just to get what looks like a promising deal done. Adequate due diligence always pays off in the long run, especially in the integration afterwards! Modern M&A playbooks can help with that.

due diligence checklists

5. Cultural Issues

Cultural issues can also greatly affect the outcome of an M&A integration. Workplace cultures can vary widely, and you’ll want to ensure as much as you can that the workplace company cultures are similar enough that they will integrate smoothly without major issues that will cause significant time, money and heartburn.

What should you do?

Due diligence should include analysis of the two different working environments, and anticipate the needs of both parties after the deal has been completed and at the outset of the integration and beyond. Some cultural differences or even minor barriers are common, but ensure they will not be so great as to hinder the M&A integration or at least try to anticipate some of the potential cultural issues beforehand so you will be ready to work through them.

Conclusion

We hope you learned from our top five reasons why M&A integrations fail hard so you can take steps to address each potential integration barrier.  The sooner teams plan for post-merger integration, the better.
Learn more about how DealRoom can assist with post-merger integration.

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There are a number of reasons why M&A deals and M&A integrations fail, and educating yourself and your team on why they fail can help prevent this from happening or at least from happening as frequently. We hope this guide will help you grasp some of the primary reasons and make you more knowledgeable on how to mitigate some of the M&A risks.

There are so many reasons why M&A integrations can fail, from inaccurate data, insufficient involvement by top tier leadership, limitations on resources, lack of long term planning, and a host of many others. There are too many reasons to list in this article.

We have thoroughly combed the list, and below we have selected the top 5 reasons why M&A integrations fail hard.

Why M&A Integration Failed

  1. Lack Of Big Picture Alignment
  2. Poor Planning
  3. Poor Execution Of The Integration
  4. Poorly Executed Due Diligence
  5. Cultural Issues

1. Lack Of Big Picture Alignment 

Lack of big picture alignment and thoughtfulness about the long term strategy of your organization can lead to a host of problems down the road, well after the dust has settled from your M&A deal and M&A integration has begun.  

A well thought-out and coherent M&A strategy needs to be established for your organization to ensure all of the parts, especially newly acquired one, work together to improve and enhance the overall organization. Focusing on closing the deal alone without properly planning what happens afterward can lead to a host of issues during the integration of the new acquisition.

When deals are in progress and even in the final stages of completion, the focus is often on the external. Questions such as how to quickly gain more market share and be afforded new opportunities to increase revenue are prevalent. 

However, once the deal happens, the focus quickly turns to the internal. Questions such as how we integrate multiple payroll systems and who from which team is doing what are abound.

What should you do?

To decrease the chances of this failure, your team needs the ability to focus not only on the immediate benefits of the acquisition and the “external factors,” but a lot of thought should be given to the internal as well. How will we integrate in a thoughtful and strategic manner to ensure business continuity for the newly merged entities?

Read also "How to Create M&A Integration Strategies Suited for Modern Day Business Environments"

2. Poor Planning

A second reason why M&A integrations fail, and potentially the leading reason, is due to poor planning. Whether planning is excellent or poor can literally make or break an M&A integration. While the best of intentions are often the focus in any M&A integration, looking at the deal through rose colored glasses can lead to significant issues down the road, long after the deal has been completed.

Poor planning for post-deal issues isn’t simply limited to the integration of the new entities; in fact, poor planning can apply to:

  • revenue projections
  • market factors
  • cultural factor
  • and lots of other areas

However, poor planning regarding the M&A integration is one that can be easily mitigated with proper planning yet tends to be one of the most overlooked factors in terms of why M&A integrations fail.

Often, there can be a disconnect between company development teams and deal integration teams. Main deals fail to integrate well due to failure to bridge this gap. Many business development professionals tens to have experience in investment banking and are primarily interested in the potential financial upside. However, often these teams fail to communicate properly with the teams that will be integrating the two companies on a day-to-day basis long after the deal has been completed.

What should you do?

Thus, proper planning should be performed not only on the financial side of things, but on the day-to-day operations side of the equation as well. The day to day operations of the newly formed entity affect everything from team collaboration to the bottom line, so ensure you enact as much planning as possible for as many different possible scenarios as possible to ensure a good M&A integration and efficient team collaboration.

Read also "Developing Effective Integration Strategies for Modern Business Landscapes"

integration planning

3. Poor Execution Of The Integration

Another top reason why M&A integrations fail hard is due to poor execution of the integration. A poorly planned or executed integration can severely reduce the value of the M&A deal, if not remove the value entirely.  

Poor execution of the M&A deal integration can be avoided by collaborating with a connected and informed team, an informed team that not only includes the people working on the deal but also the individuals responsible for the integration after the deal has been completed.

Too often, integrations of M&A deals are performed by loosely connected groups, with a mass of data and lack of meetings to discuss the entire scope of the deal, from the financial goals to the integration afterwards. How will different teams, systems and ways of doing things function after the deal is completed to ensure business continuity and smooth operations?

What should you do?

All integration plans should be carefully crafted and mapped out, and the responsibilities of everyone involved post-deal should be very clearly outlined to maximize the success of the deal and the success of the teams responsible for executing the day to day operations of the newly formed entity.

integration process

4. Poorly Executed Due Diligence

Poorly executed due diligence is another top reason why M&A integrations fail hard. When the organization’s leadership pushes through a deal without performing the necessary due diligence measures, a deal that looks promising can lead to failure pretty quickly.  

Deals can also occur without properly executed due diligence when teams become too overconfident in the merits of the deal without performing adequate research and oversight to optimize the deal’s chances for success post deal.

What should you do?

Due diligence is of the utmost importance, as it will unveil a host of potential issues and highlight the inner-workings of the organization being acquired so issues can be flagged, evaluated and worked through. Don’t overlook or minimize this enormously important step just to get what looks like a promising deal done. Adequate due diligence always pays off in the long run, especially in the integration afterwards! Modern M&A playbooks can help with that.

due diligence checklists

5. Cultural Issues

Cultural issues can also greatly affect the outcome of an M&A integration. Workplace cultures can vary widely, and you’ll want to ensure as much as you can that the workplace company cultures are similar enough that they will integrate smoothly without major issues that will cause significant time, money and heartburn.

What should you do?

Due diligence should include analysis of the two different working environments, and anticipate the needs of both parties after the deal has been completed and at the outset of the integration and beyond. Some cultural differences or even minor barriers are common, but ensure they will not be so great as to hinder the M&A integration or at least try to anticipate some of the potential cultural issues beforehand so you will be ready to work through them.

Conclusion

We hope you learned from our top five reasons why M&A integrations fail hard so you can take steps to address each potential integration barrier.  The sooner teams plan for post-merger integration, the better.
Learn more about how DealRoom can assist with post-merger integration.

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