I have built a career telling hard truths to CEOs. I tell them the things they may not want to hear but need to. When a leader is working through an M&A deal, one of the first truths I bring up is this sobering fact – 70% of M&A deals fail.

Let that sink in. I will say it another way, if you are embarking on an M&A journey, you have a 7 in 10 chance of failing. To be clear, I’m not talking about deals falling through due to legal concerns, financing problems, or issues uncovered during due diligence – I’m talking about deals where all of the above was just fine, but afterwards everything fell apart.

So, what is everyone getting wrong? Here are the top 5 truths that no one tells you about M&A.

5 Truths about M&A

        1. The last thing people think about is integrating people and cultures – it should be the first thing you think about

We once worked an M&A deal between a mega pharmaceutical company you’ve probably heard of and a much smaller boutique. The mega-pharma wanted a specific set of products the boutique was bringing to market. Everything seemed to be going smooth, the boutique’s employees were extremely helpful and providing all the information that was asked for, but my team could tell something was off. For the products to make it to make it to market, the boutique’s employees would need to continue their work post-acquisition. We asked the boutique’s employees, point blank, how many of them planned to be at mega-pharma post-acquisition. No one raised their hand.

Somehow, people are an afterthought during the M&A process. Do you really expect two groups, with different values and training to have no friction? Think about this, most of the time you end up with redundant departments and you may have to shutter one – are you ready to make that tough call, and deal with the fallout from the rest of the team?

I’ve been part of a lot of M&A deals, and here’s another truth CEOs aren’t always ready to hear – only one culture will survive, and yours might not survive intact. You spent your career building a culture of success, don’t you want to make sure it continues to thrive?

Every M&A deal needs to have a thoroughly laid out plan for how to integrate people and culture. You may not realize it but there’s a process for doing this that makes it as painless as possible.

        2. Merging technologies is a nightmare you never dreamed of

Every business moans about their ERP implementation – it’s over budget, it’s behind schedule, it doesn’t do what we want it to. Imagine you took all those problems, from two different companies, and you combined them. Then imagine there’s been no decision on whether both systems are maintained or whether only one survives.

If you keep both, imagine the endless headaches of maintaining two ERPs but also having to constantly transfer data between two totally different systems.

If only one survives, imagine having to train an entire workforce on a new technology. Imagine having to take data from the old system and uploading it into the new one. Imagine all the inefficiency, the cost, and all the complaining you’ll have to endure.

This doesn’t include all of the headaches from the other technologies you take for granted. For instance, moving one firm’s emails to your system can be a serious, six-figure, undertaking. Do you have a team to make this transition for you?

        3. Prepare for a process war

After an M&A you always end up with two competing processes for a single task and there will be never ending debates on which process should be the standard.

For instance, it’s not uncommon for an accounting department to have a 25-step process for paying an invoice. I know this because I’ve built process maps for finance departments at companies of every size. Think about how silly it would be to have two totally different 25 step processes for paying an invoice. Now scale that silliness across your entire organization for every process.

What’s worse, and you probably know this, people get extremely defensive about their processes. My suggestion here, have an objective way of viewing each process, and a referee to decide which to move forward with. This is where process mapping becomes extraordinarily helpful.

        4. You can’t assume your leadership is aligned

I’ve seen this happen way too often. One person in the firm is in charge of the M&A process, and the rest of leadership is business as usual. Then after the deal is done everyone is up in arms. There are leaders upset they weren’t part of the process, there are leaders upset because there appear to be duplicate process owners, there are leaders upset because they don’t know what the deal means for the direction of the business.

As with any change event, aligning leadership is critical. Without a destination, any direction will do. If you have the leaders from two companies merging together without a singular goal, they’re all going to move in different directions and oftentimes, they’ll move against each other. Laying out your goals and objectives, communicating those goals, and getting your leaders to buy in are all necessary steps before you head down the M&A path.

        5. If you don’t have an integration plan, you’re setting yourself up for failure

Everyone assumes that M&A is just a shortcut to growth. That after you make the deal, you can just bootstrap the revenue between the two entities together. That type of thinking is why M&A’s fail. That’s why you need to develop a comprehensive integration plan, that covers all the things beyond due diligence, finance, and legal; meaning people and process related. 

To put it another way, there needs to be steps for handling all the foreseeable and unforeseeable problems. Now you may be wondering, how do I plan for something if I can’t foresee it? This is why bringing in the right partner is vital.

A good integration plan should incorporate leadership alignment with technology and people integration. I suggest, you should work with consultants that have done this before and have been successful at it. The story I told above about the mega pharma, we only sensed something was off through an intuition developed over years of working through M&A deals. Most big consulting firms staff junior associates to deals like that, and they just don’t know red flags when they see them.

I’d like to make one final point, which is just because you have a plan, doesn’t mean anything unless you can effectively communicate it and execute on it. There are businesses out there, that even recognizing the five truths, decide to hire a big consulting firm to do change management and still end up failing. It’s always the execution piece that goes wrong.

My advice, find a partner that is not only unafraid of telling you the hard truths, but is committed to walking hand in hand with you through the entire process.