In practice, companies repeatedly make the same mistakes that directly affect the success of mergers and acquisitions (M&A).
Successfully closing a large M&A transaction is not a matter of chance, but the result of a complex, multi-stage process in which preparation, timing, access to information, and the quality of managerial decisions play a critical role.
The concept of M&A mistakes is broad; however, in practice, seven core factors most frequently lead to deal failures:
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excessive optimism of the parties and unrealistic company valuation;
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inefficient use of resources;
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ineffective organizational integration and communication challenges;
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errors in time management;
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poor planning and inability to execute the business plan;
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limited access to up-to-date company information and inadequate data preparation;
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lack of business tools to ensure data security.
The emergence of even one of these issues significantly increases the risk of failure of an M&A deal that may otherwise appear highly likely to close.
Preserving Synergies as a Key Success Factor
Both parties to a transaction—the buyer and the seller—face a critically important task: to identify areas of “synergy preservation” as early as possible in order to avoid the so-called “deal fatigue syndrome” and post-transaction problems following a merger or acquisition.
One of the key reasons M&A transactions fail is the inability to promptly identify all potential areas of synergy preservation—situations in which the combined companies achieve meaningful cost savings and an increase in added value.
Time is a decisive factor here. If synergy preservation areas are not identified within a short timeframe, the risk of negative expectations forming on both sides increases. As a result, one or both parties may lose confidence in the transaction’s rationale, which often leads to its collapse.
That is why it is crucial for both buyers and sellers to be able to quickly leverage available information resources and tools that allow them to:
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identify key synergy areas;
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accelerate the disclosure process;
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bring the transaction to a logical and successful conclusion.
Information Access Control and Data Security
Controlling access to information plays a central role in ensuring data security and helps balance the interests of the parties throughout the entire M&A process.
Effective information access management:
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accelerates managerial decision-making;
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supports the execution of the post-merger business plan;
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provides buyers with timely and accurate information to assess the deal’s viability;
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enables sellers to protect confidential data and intellectual property.
In the absence of such tools, information is highly likely to fall into the hands of competitors, media representatives, raiders, or other unwanted parties.
Given the scale and complexity of modern M&A transactions, companies should rely on a professional deal advisor—an investment company, investment bank, or legal counsel—capable of:
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minimizing legal and operational risks;
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ensuring data security;
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while simultaneously facilitating the disclosure of critically important business information.
A successful M&A transaction is always built on a balanced alignment of the buyer’s and the seller’s interests.
The Importance of “Synergy Preservation” in the M&A Process
A merger or acquisition can significantly increase a company’s added value. The buyer gains access to a customer base, optimizes supply chains, strengthens managerial capabilities, or secures additional capital.
For a company, acquiring assets, intellectual property, or a management team of another business at a discount is often a more efficient alternative to building a similar operation from scratch.
At the same time, the parties’ objectives differ from the outset:
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buyers focus on increasing capital value and the added value generated by the transaction;
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sellers are primarily concerned with the transaction price, the buyer’s profile, and the buyer’s impact on the company’s future development.
Thus, a successful M&A transaction is always the result of compromise and a balance of interests.
One of the key tasks is to identify areas of synergy preservation where the combined company can reduce costs and maximize the value of the deal. These areas may include:
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optimization of operating expenses;
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closure or consolidation of production facilities;
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relocation of personnel and equipment.
Timing, Cost of Capital, and Economic Feasibility
Time management is one of the critical success factors in M&A transactions. If synergy preservation areas are not identified within a reasonable timeframe after the start of the disclosure process, the risk of negative scenarios increases and the likelihood of successfully closing the deal declines.
From an entrepreneur’s perspective, the cost of capital and corporate expenses are constantly changing. Therefore, both buyers and sellers must be able to quickly assess the value of a transaction and determine whether it is economically justified.
In the book The Art of M&A Integration by Alexandra Reed Lajoux, it is noted that a business should generate returns of approximately 4–6% of the transaction value through synergy preservation in the first year following completion.
For example, in a transaction valued at $500 million, the buyer should realize approximately $20 million in additional benefits within the first year.
Information, People, and Processes
Beyond synergy, the success of an M&A transaction depends on a complex system of relationships among:
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personnel;
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business processes;
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management systems and information access controls.
The ability to manage these elements, identify issues in a timely manner, and prevent mistakes significantly increases the parties’ chances of achieving a mutually beneficial outcome.
Buyers need a system that provides fast access to critical, up-to-date information in order to properly assess the transaction. Sellers, in turn, require a controlled data-disclosure tool that ensures the protection of confidential information and intellectual property until agreements are reached.
The purpose of this article is to familiarize potential buyers and sellers with the key risks that most often lead to failed M&A transactions and to propose approaches to managing business-critical information.
Competent management of data and expectations not only increases the likelihood of a successful closing, but also helps safeguard the interests of employees, shareholders, and business partners.
Analysis of Errors That Can Undermine a Successful M&A Outcome
In mergers and acquisitions (M&A), neither party—neither buyer nor seller—is immune from mistakes. Violations of basic business principles and management practices pose comparable risks to both sides. In practice, such errors are often enough to derail even a potentially successful M&A transaction.
Below are seven key errors that most frequently lead to a loss of deal value or outright failure.
1. Excessive Optimism
This error arises when one or both parties see more opportunities in a transaction than actually exist, or expect outcomes that are objectively impossible to achieve after closing.
Distorted perceptions may be driven by several factors:
— a desire to outpace competitors;
— participation in competitive bidding with aggressive or “overheated” bidders;
— a sense of having passed a “point of no return,” where substantial resources have already been spent on legal and financial due diligence, advisory services, and deal support.
As a result, the parties consciously ignore warning signs and problem areas, which can later lead to unpredictable consequences.
Implications for Buyer and Seller
In this scenario, the buyer overpays for the business, relying on an inflated and unrealistic assessment of its potential and mistakenly believing they can radically improve the company’s performance post-transaction.
The seller, seeking to sustain a high valuation, restricts access to critically important information and provides the buyer with only partial disclosure. Consequently, risks become apparent only after closing, when renegotiation options no longer exist.
2. Inefficient Use of Resources
One or both parties often overlook key information blocks, which later turn into serious organizational and financial problems. These may include, for example, financial statements reflecting a substantial debt burden or employment contracts that conceal the actual number of employees and related obligations.
Implications for Buyer and Seller
A buyer who fails to conduct comprehensive due diligence risks missing hidden obligations—labor, financial, or legal—that can materially affect the economics of the transaction.
The seller, for their part, may face post-closing issues if they fail to systematize and present information that objectively reflects the true value of the business and its risks.
3. Ineffective Organizational Integration
Following a merger or acquisition, challenges related to integrating organizational structures and personnel are inevitable. The implementation of a restructuring plan is often accompanied by the closure or downsizing of certain units, changes in employee responsibilities, and a redistribution of management roles, all of which can disrupt day-to-day operations.
Without a well-thought-out management and communication strategy that accounts for the expectations of key employees and the objectives of the combined company, maintaining organizational stability becomes extremely difficult.
Implications for Buyer and Seller
The buyer may overlook the specifics of management contracts and individual arrangements with key employees, as well as underestimate the importance of clearly communicating the benefits of the transaction to maintain team motivation.
The seller, in turn, often fails to formally fix their requirements regarding organizational and social obligations during the information disclosure phase.
4. Ineffective Timing and Deal Scheduling
Closing a transaction is usually far more complex than publicly announcing it. Detailed negotiation and drafting of contractual documentation slow the process down, especially when management is not fully interested in the transaction or actively applies defensive mechanisms.
Tools such as poison pills, people pills, green mail, macaroni defenses, sandbags, golden parachutes, white knights, and others can significantly prolong negotiations and delay key decisions. When the process stretches over months or even years, “deal fatigue” emerges, substantially increasing the likelihood that one of the parties will withdraw from negotiations.
Implications for Buyer and Seller
The buyer loses the opportunity to gain timely access to contractual obligations and to properly plan the processing of information required for making an investment decision.
The seller, lacking an effective communication management system, delays the closing process, thereby increasing the risk of the deal collapsing.
5. Inability to Execute the Business Plan
Key managers possessing critical expertise and special contractual conditions may refuse to accept the new rules of the game and leave the company after the transaction. This leads to the emergence of “grey zones” in management: lost contracts, vacant management positions, or missing functions that had previously been assigned to specific specialists.
Attempts to reduce operating costs by dismissing functional experts often produce the opposite effect—higher costs related to recruiting, onboarding, and training new staff.
Implications for Buyer and Seller
The buyer is unable to timely identify key executives capable of executing the approved business plan.
The seller fails to provide a balanced organizational model that allows identification of functional experts required to implement the business plan within set timelines and an acceptable risk profile.
6. Inadequate Data Preparation
A successful M&A transaction is impossible without a structured and well-considered approach to information management. Some data should be available to all bidders, while documents containing confidential information must be disclosed gradually—only to serious contenders and the final buyer.
Errors in information segmentation significantly increase the risk of data leaks to competitors or the media at early or inappropriate stages of the transaction.
Implications for Buyer and Seller
The buyer may receive information at a stage when it should not yet be disclosed, distorting the decision-making process.
The seller, by failing to control data flows, risks premature disclosure of critical information and loss of control over the transaction process.
7. Lack of Information Security Tools
Information security is a critical element of the disclosure and negotiation process. Both buyers and sellers must protect business documentation, confidential information, and intellectual property, the leakage of which may create competitive advantages for third parties.
The absence of specialized business tools for access control and data protection significantly increases the risk of misuse and reputational losses, directly threatening the successful completion of an M&A transaction.
Conclusion
Successfully executing an M&A transaction is a complex, multi-layered process for both the buyer and the seller. It requires precise coordination across numerous dimensions: the work of different teams, top management and shareholders; the management of large volumes of business information; the timely identification of stages requiring prompt decision-making; and the detection of hidden costs. At the same time, a well-structured and continuous communication framework among all parties involved remains a critical success factor.
An effective closing of an M&A transaction is impossible without controlled access to information and flexible, well-managed disclosure of business-critical data—both during the preparation and execution of the deal and after its completion.
Buyers need real-time access to up-to-date business information in order to timely identify all potential areas of “synergy preservation” and objectively assess the economic feasibility of the transaction. Sellers, in turn, must ensure fast yet controlled access to data while maintaining the security of a substantial volume of internal documentation. This approach helps prevent information leaks that could trigger legal, financial, or reputational risks and ultimately jeopardize the deal.
Given the scale, value, and strategic importance of modern M&A transactions, entrepreneurs are well advised to rely on professional M&A advisors. Such advisors are capable of minimizing risks—both those related to information security and those arising from legal and financial aspects of the transaction—while simultaneously ensuring efficient data disclosure throughout all stages of due diligence.
One such advisor is InVenture, an investment and brokerage firm that has successfully advised on more than 50 M&A transactions in Ukraine over the past 15 years. The company is involved at all key stages of the process—from preparing investment memoranda, marketing projects, and attracting investors to coordinating the parties and structuring transactions—providing a systematic and controlled approach to the execution of M&A deals.
