March 29, 2021

Five Ways M&As Go Bad and One Great Tool to Mitigate that Risk

All Industries
Back to All News
Five Ways M&As Go Bad and One Great Tool to Mitigate that Risk

Why do good M&A deals go bad? Here's what you need to know to give your M&A strategy a fighting chance. Get the blog to learn more.

Mergers and acquisitions are meant to boost corporate value rapidly through synergies and efficiencies. That is why they continue to be such a popular and tempting business strategy.

But the reality is shocking: depending on what you read, anywhere from 50-90 percent of all M&As are flops. They hurt both companies, sometimes fatally, with years of damage to customers and reputations while a bad fit is rationalized by those who made the deal. Famous flops litter the corporate world include HP and Autonomy, Microsoft and Nokia, Microsoft and
Skype, Yahoo and Tumblr, and the list goes on.    

Adlib document transformation solution is often used for pre-M&A risk-reduction, then after a merger or acquisition to accelerate integration. So, we have seen quite a few deals up close.

Here are 5 common reasons good deals go bad.

  1. The cultures are a mismatch. Squeezing two different cultures together is like an arranged marriage in a progressive society. Chances are of a fit are not good. A glaring example is Google's 2014 acquisition of Nest for $3.2 billion. One culture was secretive and closed, the other open and in charge. Profit has yet to materialize. Management has exited.
    "Brain drain" like this is notoriously common.
  2. Organizational focus is lost. Imagine being devoted for a couple of decades to a specialized business solution and being so good that you rise to the top of the field. Then a  larger company buys you and attempts to make you part of their comprehensive suite of solutions. It is easy to see how devotion can deflate. Compromises in service and innovation are almost inevitable.
  3. The brand erodes. Great firms devoted to single solutions rise to the top along with their reputations. Their name is synonymous with the qualities they exemplify: excellence, service, best-in-class performance, and people who know the business inside and out, because they live and breathe the business on the way to the top. What happens when the name of the firm changes and that hard-won reputation is diluted by a new corporately communicated explanation of synergies with the acquiring firm? The brand loses steam.
  4. Customers and partners become disgruntled. This is a natural outcome of many M&As. And how could it not be? Customers and partners might have a measure of patience when companies are absorbed. But patience runs out when service falters, performance slides, and results are not what they used to be. Customers have no stake in the larger synergistic enterprise. And often, unless there is a clear upside, they do not necessarily want to be sold added services. The new owner might have a much-expanded CRM thanks to the M&A, but that is not permission to flog services. And that is often forgotten with the keen desire to pay for the acquisition by driving revenues as quickly as possible. 
  5. Talent flees. Lose your culture, lose your focus, lose your brand, start losing customers, and you are 100 percent sure to lose talent, or at least many of the people who matter most. How many times have you heard about senior people exiting mergers quickly or within a year or two? Psychologically, it can be like living in the best house in the neighbourhood for years only to find yourself in one of the wings of someone else's bigger house. Pride of ownership goes out the door.

Focus is a customer advantage.

Where does Adlib fit in this messy picture?

To begin with, we remain intently focused after two decades on our core strength: discovering and transforming unstructured data into intelligent data. Nothing ancillary, just helping enterprises accelerate their journey to becoming “The Intelligent Enterprise”—at the very pinnacle of our field.

To our customers, that means the latest innovation in AI-driven document conversion, classification, extraction, and analysis, based on a history of rock-solid PDF/OCR transformation of unstructured data within documents, contracts, agreements, etc. Nobody does it better.

Furthermore, because our solutions are dedicated SaaS services, they can be up and running rapidly and used with any existing customer data repository. Agility matters. The last thing our customers want is another data repository forced upon them to run in parallel with their own. That is the opposite of agility.

Due diligence at warp speed.

We can help our clients reduce the risk that defeats many mergers and acquisitions, so you can see your M&A strategy through to fruition.    

Risk reduction happens in deal identification and screening, in-deal execution and post-deal Realization. Due diligence must continue in all three stages. Rather than manually sample contracts to determine customer relationship integrity, our clients can process thousands of contracts, master service agreements, lease agreements, and employment contracts in a matter of days, moving the data to columns and rows for analysis for rapid post-integration, accelerating ROI.

What shows up is actual-versus-projected revenues, revenue potential based on price-increase potential, revenue limits based on service and lease agreements, and which customers and partners are likely to be warm to an approach by a salesforce selling synergies.

The appalling odds of being absorbed.

All these important data points are often revealed through the kind of deep contract analysis only possible at large scale in a compressed time frame using a solution of our caliber.

It is not too much of a stretch to see how an integration of merged companies, with the confidence of accurate revenue potential and future commitments in hand, might reduce the stress on employees and partners. Less pressure usually means less unhappiness. Fewer mistakes upfront means dramatically increasing the chances of M&A success.

July 15, 2024
4 Tips for Developing Effective Data Capture Methods
Learn More
July 9, 2024
An Enterprise as a House, Not a Silo
Learn More
June 9, 2024
Robust Document Delivery
Learn More

Schedule a workshop with our experts

Leverage the expertise of our industry experts to perform a deep-dive into your business imperatives, capabilities and desired outcomes, including business case and investment analysis.