Finance & Operations

The M&A Game: The Odds of Winning are Stacked Against You

April 19, 2016

For the first time in history, global M&A transactions topped $5 trillion dollars in 2015. To put this in perspective, the United States and China were the only two countries in the world with a GDP greater than $5T in 2015. This breakneck pace of M&A was fueled by record cash reserves, cheap debt, increasing consumer and board confidence, a desire to increase earnings in a slow-growth economy, and a compulsion to fortify competitive positions (see Buy, or Be Bought). The M&A volume in 2015 was a dramatic 38% increase over the $3.67T recorded in 2014 and this frantic pace is likely to continue through 2016. A recent KPMG survey of 550 M&A executives indicates that acquisition activity in 2016 will be even stronger in 2016 with 91% of respondents planning to acquire one or more companies in 2016 compared to 82% in 2015.

The Odds of Winning are Stacked Against You

Perhaps even more astonishing than the pace and sheer volume of M&A, is that the majority of these mergers and acquisitions will fail. Over the years, headlines and books are filled with a seemingly endless list of epic M&A failures; AOL/Time Warner, Daimler/Chrysler, eBay/Skype, Arby’s/Wendy’s, Kmart/Sears…and the list goes on. Mega deal failures such as these grab the headlines; but, the reality is 60% to 90% of all M&A deals fall well short of expectations and fail to create value. A KPMG survey of board members closely involved in over 100 large cross border deals revealed that although 82% believed their deal had been a success, an objective look at an independent M&A benchmark revealed that 83% of the deals failed to increase shareholder value.

In a research paper from American University, Ralph Sonenshine analyzed and quantified the outcome of 63 large corporate mergers over an eleven year period from 1996 through 2006. The results indicate that 59% failed to add value three years after the deal was consummated and the average Cumulative Abnormal Return (CAR) for all 63 mergers was negative 17%.

Another research study from the Hay Group and La Sorbonne revealed that 9 out of 10 business leaders involved in major acquisitions said their deals failed to achieve its original objectives.

The track record of M&A successes and failures is overwhelming and the likelihood of success for an acquisition is very low. The odds are such that you have a much better chance of winning by putting your money down on a gaming table in Las Vegas than playing the M&A game.

How do you Win the M&A Game?

The success, or failure, of any acquisition is forged long before the deal is signed and ensured through the execution of the integration after the deal is consummated. Prior to signing, a tremendous amount of work goes into diligence and getting the deal done; however, the ultimate success, or failure, of an acquisition depends on the key decisions, plans, and intangibles that aren’t required to sign a deal. Strategic rationale, clearly articulated goals and Critical Success Factors (CSFs), cultural fit, and a well thought out integration plan are all essential to the ultimate success of the acquisition. Once the deal is signed, success requires rigorous and rapid execution of the integration led by a dedicated business owner, who is supported by an experienced integration program manager and team, which follows a disciplined integration process.

In my next posts, I’ll explain the pre and post-merger keys to success that will improve your odds of winning the M&A game.


Larry Rowland is an acquisition integration and business consultant with 35 years of experience working with high growth technology companies to allow them to rapidly and efficiently scale. During his career, Larry has been responsible for successfully integrating the business operations of over 70 companies acquired through M&A.