The 3 Main Reasons M&A Deals Collapse & How To Avoid Them

Mergers and acquisitions deals are almost always complex transactions. They can provide growth opportunities, market expansion, and operational synergies that are otherwise difficult to achieve. However, despite the best intentions and detailed planning, many M&A deals collapse before they reach completion. Understanding the primary reasons behind these failures can help businesses better navigate the process and increase the chances of a successful deal. Here are the five main reasons M&A deals collapse:

1. Inaccurate Valuation

One of the most common reasons M&A deals fall apart is inaccurate valuation. The seller wants to make X, the buyer wants to spend Y. If the first step of the process starts from an unrealistic valuation, a deal can often fail at negotiation stage.

Even if a seller can convince their buyer to pay over the odds, the deal is most likely to hit the buffers when due diligence gets underway and the real financial picture become clear.

The inverse is also true. Once a company is sold it's sold. There is no going back and asking for more if you feel it was undervalued initially. Many deals fail because the current owners get cold feet and think they might get more.

Choose Evo-Match to find a buyer for your business, and the first step is to build a sales prospectus to share with interested suitors that will maximise your return. This will include a 2-tier valuation of your business to show what it is worth based on an independent, objective opinion (of course, we will work with you to get as close as possible to what you want).

2. Cultural Misalignment

Cultural fit is a critical factor in the success of all M&A deals, yet it is often underestimated. When two companies merge, they bring together different work cultures, management styles, and corporate values. If these cultural differences look like they will be too significant, the buyer is likely to pull the plug.

For example, a company might initially search for engineering companies to acquire. But that delivers a mismatched group of vaguely appropriate options. There is no weighting on financial profile, type of deal (full buy out, earn out, share acquisition) product range and so on. As soon as the deal moves down the completion funnel, the lack of synergy becomes obvious and it collapses.

At Evo-Match we absolutely guarantee to attract the right potential suitors. Anyone that wants to buy your business will be from an industry or niche market where there is obvious synergy or they will look to add your business to their supply chain. We are the masters at picking out just the right people, at just the right companies. We even have links to the Private Equity sector and can filter by those looking for businesses like yours.

3. Due Diligence Failures

Due diligence is a critical step in the M&A process, as it involves a thorough investigation of the target company’s financials, operations, legal standing, and overall health. The purpose of due diligence is to uncover any potential risks, liabilities, or issues that could affect the value of the deal or pose challenges post-acquisition.

However, most dealmakers waste an eternity searching, filtering and then negotiating with potential deals before it even gets down to the due diligence stage. What a waste of energy!

For buyers, due diligence starts at the first internal discussion you have about buying another business.

For sellers, due diligence is the final marking of your homework. You might convince someone of your value in negotiations but when the forensics start, you'll get caught out. Due diligence starts when you decide to sell.

Choose Evo-Match to find you a buyer and we pre-vet all potential suitors to ensure they are a good synergy match, have the right financial stuff to take you on and ensure they're not a time waster. We will also provide a prospectus on your business that starts the due diligence process right from the start with a valuation and health assessment included.

M&A deal making is a high-stakes endeavour that requires careful planning, due diligence, and strategic execution. While the potential benefits are significant, the risks are equally high. The most common reasons M&A deals collapse—such as inaccurate valuation, cultural misalignment and due diligence failures highlight highlight why Evo-Match is such as unique service.

Evo-Match minimise each of these 3 primary deal failure triggers. Both you as a seller and your buyers are brought to the table based on pre-vetted mutual interest, a financial match and a open transparent negotiation stance. We are like a Corporate Cupid.

And, as we don't like to dampen the path of true inter-corporate coupling up, we don't take any commission at all. Just pay our fee and we will leave you and your new suitor to "seal the deal".