The top reasons M&A deals die
It is exponentially easier to kill merger deals than it is to identify and close them, but whether a deal is killed accidentally or on purpose, it is still dead. The CPA profession is changing how deals are done by shifting away from viewing M&As as critical mass plays to viewing them as strategic acquisitions.
Common mistakes made include:
- Passiveness. There is a difference between being aggressive and being pushy. If your initial meeting or conversation goes well, setting the tone for a confirmed next step is key to keeping a deal moving. If you agree to talk again in a few months or get lunch next time you are in town, that gives the impression you are not highly interested in making a deal work. Always leave the meeting with a set date to speak or meet again, ideally within two to four weeks.
- Approach. Many firms often think that waiting for deals to be brought to you by brokers or by aging firms themselves is conducting an M&A search. The most successful acquirers are the hunters — the firms that have a defined strategy to find strategic combinations with structured outreach and an actionable plan to continuously fill their M&A pipeline.
- Culture. This is an important aspect in every deal. A great financial or geographic merger needs to have some alignment of firm cultures. No two firms will ever have the exact same environment, but if you are not in sync on the basics, then an integration is nearly impossible.
- Closing. Letting days or weeks or months pass after an opportunity has started is usually the kiss of death for a deal. The most successful firms that close deals are the ones willing to meet the next week, even if it means jumping on a flight to make it happen. They know how to accelerate the closing timeline and create a sense of urgency to close the deal now and not push the effective date of the integration. Closing a deal on paper with an integration date of three months or longer opens the window for the deal to collapse.
M&A activity is a vital component of a CPA firm’s ability to hit aggressive growth goals. Anyone can purchase or bid on a practice that is already up for sale. The firms who source and close strategic acquisitions with opportunities not on the market yet, are the ones who will ultimately come out ahead.