M&A: A Tale of Success and Pitfalls

M&A as a Growth Strategy

Mergers and acquisitions (M&A) are a popular means of boosting revenue and value creation, yet Harvard Business Review estimates a staggering 70% or more of M&A deals fall short of expectations.

The Dream and the Nightmare

While some M&A deals, like Google's acquisition of Android and YouTube, can yield tremendous successes, others can turn into nightmares, such as Yahoo's disastrous Tumblr acquisition.

The Root Cause of Failed Acquisitions

Many failed acquisitions stem from a failure to adequately assess the target company's ability to innovate and create successful new products.

Assessment typically focuses on existing products, but the real key is evaluating the organization's ability to develop and integrate new products.

Avoiding Deal Fever

"Deal fever" can lead to rushing through due diligence and overlooking fundamental issues.

Employ red teams, engage experts, define decision criteria, and foster a culture of healthy skepticism to avoid falling into this trap.

Assessing The Product and Technology Organizations

Beyond assessing products, it's critical to evaluate the target company's product teams, leaders, and culture.

Assess their ability to build and deploy products effectively, the level of tech debt, and the level of ownership and accountability within product teams.

M&A as a Transformation Strategy

Sometimes, M&A is used as a transformation strategy to infuse innovation into an acquiring company.

However, the acquired company's culture and methods must be protected and supported by the acquiring company to avoid stifling innovation.

Quote from Expert:

"Failed acquisitions are largely preventable, but it requires capable and experienced product and technology leadership to assess the target company and craft a successful product integration strategy," said Marty Cagan, co-author.