Blueprint for M&A Success: Avoid These Common M&A Mistakes

What Does Success Look Like in M&A?


When two separate businesses become one to create a new entity, what is gained? More importantly, what’s at stake that could potentially be lost? A thoughtful and successful M&A touches on every aspect of a business – from HR to finance, legal, marketing and more. 

For quality companies, deal multiples remain high as the current marketplace is creating opportunity for investors despite headwinds caused by inflation, interest rate hikes, and the unrest caused by Russia’s invasion of Ukraine. Private Equity and strategic buyers with a large amount of liquidity – and consequently, no need to borrow at high interest rates – are expected to take strategic advantage of buying opportunities.  

When it comes time for entrepreneurs to grow or transfer ownership through a M&A, the importance of the deal team cannot be overstated. As your advisory counsel, the deal team oversees the flow of information, reporting, and navigates what is a highly-detailed, complex, and often lengthy process to ensure not only a strong posture before going to market, but success throughout the deal and post-merger integration. Every deal is unique and while common obstacles have tactical and strategic solutions, effective planning and management of the M&A process early on can avoid all too common mistakes.    

Vision Without Execution


At a high level, the integration of two very different company cultures is one of the major challenges of any successful M&A. If the imagined synergies that led to the deal are never realized this could cause both financial loss and reputational damage. 

The importance of clearly defined priorities, a defined communication strategy, and focused plan to ensure successful integration is crucial, whether the deal is $10 million or $10 billion.  

M&A can be a long, sometimes unpredictable and often uncomfortable journey. The emotional journey for entrepreneurs represents a tremendous opportunity to not only get paid for hard work, but also allows for the opportunity to pass the torch onto the next generation of ownership.  

There is, however, a common thread running through most botched M&As: failed cultural integration. Building a successful business means building a successful company culture. And, a successful M&A strategy involves a deep dive into understanding the target company and what it will take to make the relationship work.  

When it comes time to sell your business, or take on an equity partner, it’s critical to have an advisory team that understands your business and your professional and financial goals. 


What Causes M&A Activity to Suffer?


The global economic uncertainty caused by Covid-19 caused an initial contraction in M&A activity in 2020, followed by record breaking M&A activity in 2021. While the ink on these deals is still drying, it’s easy to see 2022 as a slight pullback in deal volume at a macro level as cross-border deals are down. As companies scrutinize activity with concerns over inflation, rising interest rates, and market volatility, it’s easy to focus on inflammatory news cycles that sell doom and gloom to viewers. In the lower-middle and middle markets, there is still plenty of capital out there looking to be put to work, as deal multiples remain strong for quality companies. Avoiding these common mistakes as you begin your M&A journey will dramatically improve your deal success regardless of market conditions.

Top Common M&A Mistakes


#1 No M&A Plan 

Defining your professional and financial goals – whether it’s geographic expansion, diversification or talent acquisition – puts guardrails on your efforts and guides every decision from choosing your advisory team to fine tuning your ROI model.  

# 2 Valuation Errors – Overpaying 

When valuation errors are made, buyers may overpay for the business which is part of the reason why more than 70% of M&A transactions perform poorly in terms of meeting their ROI targets. 

#3 Insufficient Due Diligence 

Due diligence can be one of the most complex steps of M&A. A lack of due diligence and value-destruction that comes with it, is all too common.  

#4 Assuming Too Much Debt 

Be careful not to take on more than you can handle. Interest rate changes and your monthly principal can increase causing stress in your ability to service your debt obligations.  

#5 Overestimating Growth 

A clear growth model helps provide a vision of what you’re expecting post M&A, though often ego and emotion can cloud a clear and realistic model of growth. A little bit of humility might go a long way.


Be Prepared 


Your business is valuable, but what is your business worth to a buyer? Are you ready to sell? SEA’s Readiness Roadmap can prioritize areas of focus, bridge value gaps, and develop a timeline with accountability to optimize value before your business goes to market. 

People, culture, and above all, communication represents the lifeblood of every M&A deal. The willingness to properly prepare for an M&A deal determines your ability to succeed. Establishing a clear deal thesis with your advisory team is often an indicator of success, as it enables business owners and your deal team to not only see the finish line, but to cross it together.  

When it comes time to navigate the next chapter of your entrepreneurial journey, Strategic Exit Advisors (SEA) has the resources and experience to help you. Call us anytime (215) 489-8881 or schedule a conversation here.   


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