M&A – From Optimism to Failure

It’s well known that Mergers & Acquisitions (M&A) often fail, or at least fall well short of plans. That’s despite the optimism and thoughtfulness behind every decision.

Two things we know*:

1. 50% to 80% of M&A deals fail
2. Culture is by far the biggest contributing factor to those failures.

We appreciate that M&A is thoughtful and due diligence detailed – on nearly every detail, except organisational culture!

Its therefore not surprising, that we’re being asked much more often and invited in a lot earlier – how to get an understanding of strengths, opportunities, challenges and tension points ‘between’ cultures.

The reason people do Mergers and Acquisitions is clear – they can be extremely valuable.  Rapid growth, new markets, new geographies, complementary products, new customers, optimising structures, and realising cost savings, can all add to improved financial performance.

The only problem is that despite all that good intent and optimism, the reality and potential don’t always meet as planned.

A Merger or Acquisition is just like any serious relationship or marriage. There’s a courting (pre-due diligence into due diligence), wedding (deal is done, no cold feet…), marriage (hopefully, happily ever after or perhaps, too often, divorce).

A bit like the serious relationship cycle outlined above (a common path, but not the only path!), M&A sees a huge amount of upfront effort, great celebration of the day, and diminishing levels of thoughtfulness or deliberateness on nurturing the relationship ‘post completion’ – but still a hope it will go well.

So, let’s break down why we do M&A, the known costs, M&A failure and what we could do differently!

We can put fancy consulting and banking language around this, but ultimately, we do M&A to grow – to be more valuable. There’s more value in 2 groups being together – for better revenues, customer offering, operational efficiencies and more. We do M&A to make the pie bigger, have bigger impact, and grow the value of organisations.

Known costs in M&A naturally have some variation – but typically represent the costs of valuation, deal structuring, negotiation, due diligence and legal fees and so forth). This can easily be between 1-5% of the value of the deal. For example, $100m deal, $1-$5m of fees get you through to the wedding day.

It’s assumed through these processes, that are largely legally and financially derived, that this union has two partners that want to be together, and will make a go of it through thick and thin…for better or worse…

‘Post completion’ comes with a new range of challenges – where to integrate and where to remain separate, where to provide support and where to give full autonomy, necessary controls versus appropriate freedoms – the list goes on and on.

We go into these things with great hope and optimism, and the elevated cortisol of ‘doing the deal’ are invested through the process. We often leave with rose-tinted glasses.

We are all for growth and optimism, but we’d also suggest a dose of realism and planning can go a long way to making dreams a reality.

Depending on where and what you read, M&A fails between 50% and over 75% of the time. That isn’t the best strike rate!

The cynic could argue that failure is an essential part of the cycle, rewarding the smarts of bankers and advisors who value businesses and people. Maybe that’s the hard part at play though. After all, how do you value people and culture before the deal, and then how do you realise the fullest value of combining businesses, people and ideas to ensure that it is more than simply the sum of the parts.

The great (and solvable!) irony of M&A failure is that it most often comes where we spend limited structured time and effort on people and culture. The biggest point of failure, and the biggest potential point of success, is addressable. Sadly though, we rarely give it due care beyond a lunch or dinner to meet Founders – and eyeball them to see if we can intuitively judge whether they’re culturally aligned and we can get along well with them.

There are a bunch of reasons we fall short on this part of due diligence and post-merger integration. It’s an area that can be harder to quantify, it is a cost, and often perceptions of People and Culture practitioners are as an internally-focused, often deficit-based support function – not aligned to the optimism and growth, of time-pressured events.

Cultural assessment in due diligence is a bit like unleashing ‘that’ family member on your potential significant other while you’re courting them. You know they’ll need to meet your weird Uncle eventually, but you don’t want to put the relationship at risk. So you keep them away, for fear of repercussions. You want to keep control of making that great first impression.

If we really want to realise the full potential, growth and value from M&A, we must fully appreciate organisations for what they are – a web of human relationships and contribution. If that’s the case, it’s illogical to not find out everything we can about the people, what makes them tick, and learn what we can learn – with the same structure, rigour and smarts of the rest of the Due Diligence process.

From there, tough conversations become easier – you’ll be well informed on strengths, opportunities, tensions, discomfort, what people’s drivers are and have a change to make the foundations more solid – which is where the value you hoped for, and maybe even greater value than you knew possible, can be realised.

Plus you’ll meet the weird Uncle, and be prepared to support the value he might add as well, or at least contain the tension he adds into every event.

So – we challenge you to front into Culture as a critical part of Due Diligence. It’s not so much a risk to the deal going ahead, as it is much more importantly the opportunity for the deal to truly succeed.

It’s a comparatively small investment of time and effort that de-risks the deal, and its forward success, and pales in comparison to the opportunity cost, and deep pain of M&A gone wrong.

*Reference Points on M&A Failure

• 70-90% McKinsey 2024 (financial data)
• 70-90% EY 2024 (financial data)
• 70% Forbes 2025 (financial data)
• 30% Mercer (outlier – no figures quoted)
• 75% Financier Worldwide 2022 (financial)
• 70% – Experienced Chair of NFP known for ability to merge entities successfully
• 50-90% – AI integration of all available internet research and data 2025