Mergers and acquisitions (M&A) represent a huge opportunity to drive growth and create value - but why do so many fail? What separates a successful deal from one that derails?
In this article, we'll explore how to make your M&A projects more efficient, how to avoid common pitfalls and how the right software solutions can help you focus on creating value.
What is M&A?
Mergers and acquisitions are the consolidation of two or more companies. While a merger brings together two independent companies to form a single legal entity, an acquisition is a transfer of ownership where one company buys another. In both cases, successful M&A requires clear strategic objectives, well-planned integration and the right financial tools to ensure smooth transitions.
Benefits of M&A for companies
M&A allows companies to achieve strategic goals that may be unattainable through organic growth. Some of the most important benefits include:
- Increasing market share or entering new markets
- Improving product offerings or expanding service offerings
- Achieving economies of scale, such as reducing headcount or financing costs
- Spreading risk across markets or sectors
- Extending the value chain, such as through vertical mergers with distributors
However, realizing these benefits requires more than just signing the deal-it requires careful planning, data integration, and efficient execution.
What are the challenges and risks in M&A projects?
Despite their strategic potential, M&A projects carry significant risks. Common challenges include:
- Unclear strategic rationale: If your M&A strategy is not closely aligned with the company's business plan, it is likely to fail (or burn a lot of money).
- Misinterpretation and lack of focus: Failure to understand a company's success factors (and destroying them in the post-integration phase).
- Cultural clashes: Differences in corporate culture can derail post-merger integration.
- Underestimating integration costs: Many deals fail because companies overlook the true costs and complexities of integration.
- Poor leadership and communication: Lack of clear communication can lead to confusion and misalignment during the integration phase.
M&A projects are not a one-person show – they are a team effort
M&A cannot be driven by an outside advisor or dedicated resource alone - it is a team effort that requires close alignment across the organization. It involves company resources - and subject matter experts - as well as the entire M&A value chain. Putting as much effort into the planning process as the execution of the transaction is critical to achieving your goals.
The M&A value chain:
