All M&A transactions are unique, the challenges are significant and the success rates are very poor!
Over the last several years, a great deal of literature has been dedicated to the significant uptick in merger and acquisition (M&A) activity. This attention is likely due to two factors:
- the volume of capital invested each year
- the amount of capital and shareholder value lost due to failures in these transactions
Each year U.S. companies spend more than $2 trillion on M&A transactions and the failure rate of these transactions has been estimated at 50%-80%, based on numerous studies.
Most of the published analysis for improving the success rate is focused on the strategic buyer’s perspective, defined as a public or private company that buys another company usually in the same business or consumer segment. However, equally important and significant players in the M&A marketplace are financial buyers such as investment banks, private equity funds or private equity investors who acquire and integrate businesses.
In this paper, we will examine the lifecycle of a deal, the challenges of M&A from the buyer’s perspective and describe several root causes for failure and simple recipes for improving success rates.