Challenges in Mergers and Acquisitions

There's much discussion about M&A, but let's focus on the M - mergers. Sharing my experience below. 👇 Mergers typically involve equity splits within 40/60 or even 30/70. I've worked on mergers from both the operating and investment banking sides, across public and private companies. In my experience, these are the key challenges: 1. Diligence: Particularly challenging as companies are often competitors. Sharing data becomes complex. One one deal between public companies, we had to coordinate opening data rooms at the exact same second because neither side trusted the other to follow through! 2. Defining ownership splits: a. Public companies face constant share price movements during negotiations and the again between signing and closing. Even with established collars (agreement that deal terms stay fixed if movement is under 10%), we often exceeded these limits before signing. One unique advantage of public company mergers is you have analyst consensus forecasts that are unbiased, credible ways to set merger ownership ratios. Using management forecasts means each side has an incentive to show hockey stick growth. b. Merging private companies typically results in the most recent valuations not from the same date, making using valuation a difficult metric to use. Example: "Your valuation is from the peak of 2020, it's not real, ours is from the depths of 2023." The company with higher revenue typically wants to define ownership by revenue split (e.g., "$100M revenue versus your $80M means we should own 56% of the combined company"). If you're more profitable? That becomes your preferred metric. 3. Non-deal terms like choosing the new company name, which headquarters is the new headquarters, and of course every employee role is at risk because now you have 2x of everything. 4. Board and management structure: Some mergers arise when there's a departing CEO with no clear successor, which simplifies the hardest management decision. Even with a clear CEO candidate, questions remain about Chairman, COO roles, and board composition. Folks ready to retire makes that role selection easy, I recommend round robin for the rest of the roles (Chairman from company A, CEO from company B, CTO from company A, etc.) Despite these challenges, consider exploring mergers with competitors and partners: 1. Combine smaller competitors to create a market leader 2. Merge with your largest partner 3. Combine to achieve the scale that's required to go public Questions? Have merger experience? Please share in the comments below.

5 things that can turn a winning deal into a losing deal: I've worked on hundreds of M&A deals. These consistently spoil the IRR that investors have modeled out: 1) Founder stops caring Being a founder is exhausting. When they exit for a life-changing amount, they might check out, no matter how good the incentives are. They're not bad people - they're just tired and ready to move on. 2) Customers were based on relationships Those "consistent, healthy renewals" you saw in the financials was actually due to the previous owners potentially making campaign contributions to the govt officials, getting business from family members or their college buddies, etc. When owners leave, the contracts go to the next highest bidder since the relationship is no longer there to sustain it. 3) Company culture mismatch Roll-up investors love the idea of finding "efficiencies" between companies. Makes sense on the spreadsheet. Just remember there are real people behind the redundancies you find and the teams you merge. 4) Blindsided by new regulations Everything can look great - but then some new legislation is enacted that substantially increases the target company's cost of doing business. Very common in emerging markets and highly regulated industries (i.e. infra, energy, mining, fintech, etc). 5) Key person risk Founders aside, sometimes the person keeping the trains running on time is an under-appreciated engineer who feels resentful they didn't get upside on the deal - and becomes a flight risk. The biggest risks to your deal are often outside the spreadsheet. #privateequity #duedilligence #mergersandaquisitions #riskassessment

Hard truth, most M&As fail. Yet, I have seen others succeed. The number one reason I have had clients succeed is that they prioritize people and culture. Significant research has been done on this issue, and here is a list of the top 10 reasons mergers and acquisitions fail: 1. They overpay for acquisitions. 2. Poor due diligence tanks the deal. 3. Cultural clashes destroy value. 4. Synergies never materialize. 5. Strategic rationale is weak. 6. Post-merger integration fails. 7. Human factors get ignored. 8. Communication breaks down. 9. Regulatory issues create friction. 10. Top talent walks away. But here's your playbook for success: 1. Strategic Planning & Execution ↳ Do thorough due diligence, set clear objectives, and build comprehensive integration plans. 2. Vision, Mission & Values ↳ Map the landscape of both organizations. ↳ Create an inspiring unified vision. ↳ Craft a compelling mission. ↳ Set shared values that guide decisions. ↳ Build a strategy that maximizes strengths. 3. Market Analysis ↳ Study the industry, customers, competition, and opportunities deeply. 4. Communication Strategy ↳ Build a clear plan to keep all stakeholders aligned and informed. 5. Integration Planning ↳ Form a dedicated team, create detailed plans, and tackle cultural issues head-on. 6. Talent Strategy ↳ Review org structures. ↳ Map roles clearly. ↳ Set selection criteria. ↳ Plan transitions carefully. ↳ Keep key players engaged. 7. Leadership Assessment ↳ Start during due diligence. ↳ Use data to drive decisions. ↳ Focus on team dynamics. ↳ Move decisively on key roles. Follow this framework, and you'll dramatically increase your odds of M&A success. The key? A systematic approach. Focus on clear communication, thorough planning, and smart talent management. Tell me, what was your strategy for a successful M&A? — P.S. Unlock 20 years' worth of leadership lessons sent straight to your inbox. Every Wednesday, I share exclusive insights and actionable tips on my newsletter. (Link in my bio to sign up). Remember, leaders succeed together.

It’s not just an M&A deal, it’s a culture shock waiting to happen. In M&A, the spotlight is on closing the deal: growth targets, synergies, and operational integration. And too often what’s missing is the human side of the equation. Studies consistently show that 70% of deals fail to deliver expected value, and the good ol' fashioned culture clash is a top reason why. What derails progress post-acquisition? 𝗖𝗵𝗮𝗻𝗴𝗲 𝗳𝗮𝘁𝗶𝗴𝘂𝗲: especially for teams who’ve already weathered months of uncertainty. 𝗠𝗶𝘀𝗮𝗹𝗶𝗴𝗻𝗲𝗱 𝘃𝗮𝗹𝘂𝗲𝘀: when purpose, pace, and power dynamics don’t sync. 𝗦𝗶𝗹𝗲𝗻𝘁 𝗮𝘁𝘁𝗿𝗶𝘁𝗶𝗼𝗻: high performers leaving not for more pay, but for more clarity. Most executive teams plan for the deal. Few plan for the day after. And even fewer have a real culture integration strategy beyond the welcome emails and all-hands. That’s where Allison Wright and I come in. At 3 Keys Consulting, LLC, we help leaders navigate the 𝘳𝘦𝘢𝘭 𝘸𝘰𝘳𝘬 of integration: clarifying culture, aligning leadership, and (re)building trust across newly combined teams. What’s your plan to make sure people don’t just stay, but stay engaged and aligned? #MergersAndAcquisitions #MAndA #ChangeLeadership #CultureIntegration #AlignLeadership #Trust

I’m excited to share a new and timely piece of research that I recently completed with my colleagues at BCG. Our study of M&A in 2024 found that transactions with higher announced synergies—whether as a percentage of deal value or in absolute terms—took 30% longer to close.     While synergies showcase a deal’s financial and strategic value, they also draw greater regulatory scrutiny. Larger synergies often signal more complex integrations and potential market impact, prompting regulators to look deeper into the deal’s feasibility and compliance.     For dealmakers, this adds to the complexity of the closing process. It becomes critical to enhance planning and set realistic expectations around timelines. Balancing the appeal of synergies with the potential for closing delays is essential to successfully navigate regulatory challenges.     For the full breakdown of our findings and actionable recommendations, read BCG’s 2024 M&A Report. https://lnkd.in/e2m9DjZG   Many thanks to my co-authors Andrew S., Dr. Jens Kengelbach, Lianne Pot, Thomas Endter.    #BCGMAReport 

We've all heard how bank mergers are transformative, but the real challenge lies in the integration of the two businesses, right? I discussed this thought with my Cornerstone Advisors partner, Quintin Sykes, in Scottsdale yesterday afternoon. FWIW, his team has led integration efforts in four of the top 20 bank M&A deals since 2023. Based on these experiences, he offered these three "early action items" for those who haven’t done a deal in a while: ⏰ Start Planning Early With the resurgence of significant acquisitions (e.g., Renasant Bank, UMB Bank, United Bank, SouthState Bank, Sunflower Bank, N.A., Burke & Herbert Bank), it's crucial to begin integration planning as soon as the deal is announced. To paraphrase my colleague from Carolina, early planning aligns key goals + sets the stage for a smoother transition. Thinking about your merger readiness well before due diligence starts? Even better. 📣 Focus on Culture & People Address cultural integration and employee concerns from the jump. This is a theme I heard for years while I was the #CEO of Bank Director and, most recently, on stage at #AOBA24. Change is difficult for many, so you can’t over-communicate, be it internally or externally. 🧗🏻Figure Out Your Tech Gaps What do you want the combined organization to be known for? Does your combined tech get you there? You may need to manage new complexities, especially in IT and operational systems… but if additional projects arise that are needed for integration, how much do you take on at once? _ _ _ 🗒️ Taking a page from my/our friend Chris Nichols at #SouthState, I shared the approach #Cornerstone takes when engaging in bank mergers in the accompanying images. Whether you're in an FI looking to grow through acquisition or supporting those engaging with potential sellers, I invite you to share your experiences (or questions) about #MergerReadiness in the comments. What strategies have worked for you? What challenges have you faced? Let's discuss 👇🏻

M&A Success: From Transaction to Transformation A paradigm shift is happening in M&A: Yesterday's playbook focused on transactions Today's success demands transformation The difference lies in how we approach change — Here's why traditional M&A thinking fails: 1. The Mindset Gap Old thinking expects certainty When transformation demands: - Embracing uncertainty - Questioning assumptions - Seeing opportunities in chaos Because predictability is an illusion. 2. The Agility Challenge Static playbooks don't work anymore When success requires: - Real-time adaptation - Dynamic decision-making - Continuous learning Because change is constant. 3. The Human Factor Transaction focuses on systems When transformation needs: - Employee engagement - Cultural integration - Shared learning Because people drive success. 4. The Success Metrics  Beyond financial indicators What really matters: - Employee retention - Knowledge sharing - Career advancement - Cultural cohesion M&A isn't just about combining companies It's about transforming possibilities Into sustainable growth. Leading an M&A transformation? DM me "TRANSFORM" to discuss how to move beyond transactions.

What is the #1 mistake leaders make when planning a merger or acquisition deal? Ignoring the loss of identity people can experience during an M&A deal and not factoring that into timelines and leadership preparedness. On the new "MasterYour Merger" podcast, M&A empresario Klint C. Kendrick, PhD, SPHR and I unpacked a critical but often overlooked challenge in mergers and acquisitions: EMPLOYEE IDENTITY LOSS. Culture clashes and change resistance aren't just about poor communication. These deal consequences can be equally driven by people who grieve the loss of their roles, titles, and professional identities. Our episode explores how leaders can support employees during M&A integration by: ·      honoring legacy  ·      managing transitions with empathy  ·      crafting a clear people strategy If you're involved in M&A leadership, post-merger integration, or change management, take a listen: 🎧 Apple Podcasts: https://lnkd.in/gBc7wjY7 🎧 Spotify: https://lnkd.in/gkDHHMUH OR 📺 Watch on YouTube: https://lnkd.in/geMQJEXS 🔑 Klint and I cover key topics: •            Identity shifts during M&A •            Employee retention and engagement strategies •            Emotional stages of M&A transitions •            Middle manager empowerment in integration •            Culture and people strategy in mergers Thank you, again Klint for highlighting this too often overlooked influence on the success of an M&A deal.

“Knowing Something” M&A in a Minute ⏰ — 1️⃣ ➕ 1️⃣ 🟰⁉️ Even for lawyers, that’s some pretty easy math. Or is it 🤔? If you’re doing mergers and acquisitions (M&A), the answer might not be so simple. Despite hard work and the best intentions, many M&A deals fail to deliver—some fail spectacularly 📉 1 + 1 < 2. Often, that’s because of a poorly designed integration strategy and failed execution. What you often hear in M&A is optimistic talk about “capturing value” and “delivering synergies,” where 1 + 1 > 2. With the continuing uncertainty and volatility, it’s more important than ever to develop a solid integration plan early in the deal process and execute with tactical precision. Here are some things to think about ⬇️ 1️⃣ Think expansively about synergies. Don’t be limited by the deal model to identify synergies. 💡Figuring out what to PAY for a business is a lot different than figuring out what to DO with the business once the deal is done. 2️⃣ Cost synergies are easy targets…but don’t stop there. When people think about synergies, the usual starting place is cutting operating costs. Makes sense—cost synergies are usually easier to find and measure. But much of the real long-term value in deals flows from… transformation. And revenue and capital synergies provide a lot more opportunities for growth and transformation. For example, doing a deal that improves the combined business’ balance sheet, working capital needs, and financing costs can provide real long-term value. So spend some time looking at ways to ADD rather than SUBTRACT. 3️⃣ Day 1 is too late. Before you integrate a new business, you have to integrate your own team. The days of silos and separation in the deal and integrations teams are long gone—or they should be if you want your deals to succeed. Integration planning should permeate through your deal planning process—business development, finance, operations…all working together with a consistent strategy. One band…one song 🎶 And legal shouldn’t be left out of the fun. The lawyers need to understand the strategy, deal drivers, and areas of expected synergy—that way they can structure the deal and target protections in ways that maximize the chance of post-closing success. So tell me…how do you make sure that 1 + 1 > 2? ______________ If you like “Knowing Something” M&A in a Minute ⏰, please click the 🔔 at the top of my profile so you don’t miss any new posts! #mergersandacquisitions #mergersacquisitionsdivestitures #klgates #integration #antitrust

Hot off the press! We just released the annual Bain & Company M&A Report. Highlights include: 👉 M&A is cyclically low, by all measures (deal count, deal value, M&A as a % of global GDP). Deal value is up 13% since 2023, but below historical averages and certainly well below 2021 exuberance (which was an anomaly). It remains a challenging climate for M&A 👉 We anticipate that further easing of interest rates is possible, but overall levels are likely to remain relatively high. With greater macroeconomic and geopolitical uncertainty policy makers struggle to balance inflationary pressures and economic growth. 👉 The continued gap in valuation expectations keeps buyers and seller from reaching terms (46% of sellers are waiting for more favorable deal valuations, 43% of buyers are waiting for more attractive assets) 👉 Those deals that do occur face costly,  prolonged regulatory scrutiny (an average of 3 months to close without regulatory scrutiny vs an average of 10 months when scrutinized). Thus dealmakers are prioritizing deals with less likelihood of regulatory review (regulatory due diligence is key!) and proactively engaging with regulators and counterparties to address concerns early. But in many geos, regulators have signaled a shift toward a return to traditional merger enforcement and more timely processes. That's a good sign. ✅ Despite those headwinds, buying remains a faster and cheaper way to build new products and services in response to disruptive technology. 🌍 And M&A, divestiture, and JVs must be part of every company’s strategic response to post-globalization factors: trade barriers, domestic industrial policies, immigration/workforce challenges, data privacy / data management policies, restrictions on technological transfer, and review of FDI. My modest contrinution was to write the payments chapter -- more on that aspect later in the week. In the meantime, kudos to the Bain Global M&A and Divestitures practice team that developed the report, with special direction from Les Baird, partner; David Harding, advisory partner; Dale Stafford, partner; Kai Grass, partner; Suzanne Kumar, practice executive vice president; Rebecca Levinsky Telzak, senior manager; and an editorial team led by David Diamond. Bain & Co 2025 M&A Report: https://lnkd.in/gG8kHynN