Why Most Mergers Fail — And How to Avoid It

Opinions expressed by Entrepreneur contributors are their own.

Key Takeaways

Introduce yourself to the acquired team before close and explain the why behind the deal.
Don’t promise “nothing will change.” Transparency builds trust.
Address employees’ real concerns — job security, benefits and leadership — to preserve the value you bought.

Mergers and acquisitions (M&A) get the headlines. The big deal announcement, the photo ops, the press buzz. But the real work and the real value begin after the ink dries. According to Harvard Business Review, between 70 and 90 percent of acquisitions fail. The majority don’t fail because the deal was bad, but because the integration failed. A successful integration is especially critical in private equity portfolio companies (portcos). As an executive charged with value creation, the fastest way to lose the confidence of your board — and potentially your job — is to buy EBITDA then lose it.

You can find a checklist for the closing activities anywhere, and countless consulting firms can help you rationalize tech stacks. But most leadership teams fail to empower employees to feel like they are part of the change, not a victim of it. In my experience, you can de-risk an acquisition before the deal closes by engaging both the target company employees and your existing employees. Here are a few of my favorite tricks to help you feel confident in your team at close:

Before the deal closes, I host town halls with the current owner and as many of the employees as possible in the room. This town hall kicks off with the current owner sharing they have decided to sell, the why behind this decision, and why they chose us as their partner. It gives me the opportunity to make connections and address any potential concerns right away.

In this town hall and in subsequent meetings, I am exceptionally clear about what will change and what will not — and when. One mistake buyers make is promising nothing will change — something always changes. Even if it seems as trivial as changing the system in which they clock in every day, these changes are a visible reminder that you did not deliver on your promise. Smart operators go a step further to highlight when these changes are likely to occur — what you can expect on day 1, 30 days post-close and even changes that might take a while to deliver

People make the difference, even in businesses where your patents or facilities drive acquisitions. Earn the right to be the leader the acquired employees are seeking by making their concerns your focus. As soon as they learn the news, every employee will be asking, What’s In It For Me? Am I going to lose my job? Will I have to change benefit plans and doctors? Will they lay off any of my team?” Until you address these topics, these employees will have a hard time being excited about the change. And this also includes your existing employees: how will the new employees impact their positions? Be airtight on these messages. It helps to brainstorm the questions you could expect and have a “Frequently Asked Questions” document prepared to leave behind that addresses these questions.

M&A may be sexy, but integration is where the transformation happens. Nail it, and you unlock the deal’s full potential. Miss it and that press release will be a reminder of what you failed to execute.

Key Takeaways

Introduce yourself to the acquired team before close and explain the why behind the deal.
Don’t promise “nothing will change.” Transparency builds trust.
Address employees’ real concerns — job security, benefits and leadership — to preserve the value you bought.