9 Stats on M&A Deal Failures

Over a 25 year period from 1981 to 1996, researchers have identified over 423 U.S. companies with assets over $500 million that have filed for bankruptcy.  This research has revealed patterned behaviors of M&A failure.  Here are nine statistics from various studies on M&A failure to consider.

An international survey of 250 executives with M&A responsibilities in 2002 reported their top reasons for eventual deal disappointments. [1]

• 66% said they routinely overestimated the synergies available from their acquisitions
• 50% found that their targets had been dressed up to look better for the sale
• 50% the participants said their due diligence failed to highlight key issues
• Only 30% of the executives surveyed were satisfied with the rigor of their due diligence processes [2]

A review of 160 corporate mergers revealed similar results in 2004.[3]

• 70% of mergers failed to achieve expected revenue synergies
• 39% of mergers failed to achieve at least 90% of the cost synergies they projected
• About 25% of mergers underperformed on projected cost synergies by more than 25%

A review of 80 mergers during the late 1990s indicated that most merging companies actually experienced stagnate or slowing growth after the merger.[4]

• Only seven out of 80 of companies (8.7%) were able to accelerate revenue growth during the three years after the merger
• Overall, acquirers posted organic growth rates 4 percent below their industry peers

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Sources: [1] http://www.bain.com/Images/BB_Merger_before_the_merger.pdf [2] When to Walk Away from a Deal.  Harvard Business Review. April 2004. [3] Where Mergers go Wrong. McKinsey on Finance. Number 10, Winter 2004. [4] Mastering revenue growth in M&A. McKinsey on Finance. Number 1, Summer 2001.