The Strategy Skills Podcast: Strategy | Leadership | Critical Thinking | Problem-Solving
507: Decoding M&A: Why 70% of Deals Fail and the Scorecard for Predicting Success
Dec 9, 2024
Baruch Lev and Feng Gu, co-authors of The M&A Failure Trap, share their insights on why 70% of mergers fail. Lev, a leading authority in corporate finance, and Gu, an expert in corporate acquisitions, discuss the pitfalls of over-optimism and lack of due diligence in M&As. They introduce a unique scorecard that evaluates key success variables like deal size and employee dynamics. The conversation highlights the crucial need for strategic planning and accountability to avoid costly acquisition mistakes.
58:16
Episode guests
AI Summary
AI Chapters
Episode notes
Podcast summary created with Snipd AI
Quick takeaways
- CEOs often exhibit overconfidence that drives them to pursue large acquisitions under investor pressure, frequently leading to significant financial losses.
- Inadequate due diligence and flawed CEO incentive structures contribute heavily to the high failure rates of mergers and acquisitions.
Deep dives
CEO Overconfidence and Acquisitions
CEOs often display high levels of optimism, with 30% to 40% exhibiting overconfidence regarding their ability to successfully integrate acquired companies. This overconfidence leads them to pursue large acquisitions under pressure from investors and boards, believing that these acquisitions can remedy operational issues such as lagging sales or market share. Although some acquisitions may succeed, studies show that acquisitions frequently result in significant financial losses for the acquiring company, often described as the 'greatest value destruction' in corporate business. This high failure rate is exacerbated by the perception that acquisitions are a quick solution to broader strategic challenges.
Remember Everything You Learn from Podcasts
Save insights instantly, chat with episodes, and build lasting knowledge - all powered by AI.
