When merger talks break down

By Karen Thomas-Bland, Global Board Level Advisor, Partner level Management Consultant and Non-Executive Director and Founder of Seven Transformation


We have seen a few failed M&A deals so far this year; Unilever’s bid for GSK, LV’s bid for Royal London, and Nvidia abandoning their bid for Arm. Nothing unusual in this as according to McKinsey about ten percent of all large M&A deals are abandoned before they reach the finish line. So, what leads to deals failing before closing, and how can you keep the momentum built up and avoid the organisation stagnating?

Mergers and acquisitions are complex processes, and as such, there is a lot that can go wrong. The longer negotiations stretch out, the more anxiety builds to complete the deal. There are several principal reasons for why buyers and sellers fall out of love with a deal and never make it to the altar.

Management may realise through due diligence that the synergy and value creation potential is not as strong as once thought, leading to a need to renegotiate the terms of the deal. These negotiations are sometimes successful and other times leads to the respective parties walking away. It is important to always have a walk away price and stick to it to deliver on your value creation case.

Culturally if it looks challenging, from an integration perspective, talks may also stall. What may first have appeared to be two similarly aligned cultures could sometimes be found to be quite different and will require significant post-merger integration time invested. This mismatch in culture could lead to friction, reduce team effectiveness, and mean synergies risk not being delivered on time. It is helpful to learn this in the negotiation phase and decide if insurmountable before the deal is done.

Regulatory challenges, political opposition, and even consumer or activist involvement can scupper a deal. This scrutiny is only likely to intensify not just for the impact on competition, but also for the benefit to broader society and stakeholder groups. Building deep analytic capability can help detect early warning signs, including where regulation is likely to emerge or develop in the future. Transactions can be slowed and stalled by the need to obtain regulatory approval particularly for deals which across multiple jurisdictions. In these cases, it is important to enter the deal with a realistic idea of timeframes. Failure to do so can cause negotiations to stall or break down completely.

The concentration of market power within certain sectors is also a key factor. In certain high-visibility industries such as technology, health care, and financial services, antitrust regulators are more likely to scrutinise proposed deals that occur in industries where market share or customer data is already concentrated with the few.

Deal breaker terms can also emerge. For example, there might be differences in desires for management retention, or the buyer could want a clause that the seller’s management team rejects. In these cases, the needs of one party or the other are denied by the terms proposed in the agreement, getting an automatic “no” and causing the deal to fall through.

Most challenging is when leadership egos get in the way, the deal leads the management team to turn inwards, jostle for position and not focus on building relationships and knitting in new colleagues. Meetings through due diligence can turn hostile and potential new colleagues may not feel welcomed.

Once a deal is in play, investors will expect leaders to continue to follow the M&A path outlined, and they will likely be disappointed if the price is less favourable, or the deal is withdrawn altogether.  Besides companies incurring costs like advisory and termination fees, leaders in these businesses are often perceived as having wasted resources pursuing a strategic path that turned out to be a dead end. These U-turns can be severe, affecting both the reputation and share price of all parties involved and leading to questions being raised about the calibre of the board and management, and the credibility of a story which flips quickly from ‘being better together’ to ‘better to go it alone’.


If you find yourself in this situation it is important to:

Have defined an exit strategy ready before you ever need it. Leaders need to consider the possibility that a failing, or failed transaction may leave the company vulnerable. Having explained the benefits of a proposed deal to shareholders, you may have radically changed the story of your company. There needs to be a carefully worded communications plan about how your organisation will continue to thrive and have a strategy that can be followed. It is crucial to think about the external and internal communication messages.

The role of the board is particularly important for managing investor expectations. They need to support management by asking questions about how failure to complete a deal will be received by markets, regulators, shareholders, and politicians, as well as by other stakeholders, including consumers, employees, and affected community members. This makes composition of the board important, as having a diverse board will allow for more well-rounded debate on these crucial matters.

Energy levels of employees post a deal failure tend to be low with people feeling deflated and demotivated. There needs to be a big push on keeping energy levels high and reassurance that we have a growth strategy. Hence, the importance in the strategy of having alternative paths for growth and not backing only one hypothesis. Leadership visibility, communication, and engagement will be needed to keep momentum levels high. In an employee centric job market its crucial to make sure employees do not lose confidence and walk away.

Finally use the opportunity of building momentum to transform the business and consider a leadership shakeup. If you were planning to use the M&A to restructure the business and drive out more value continue these plans in an organic way. It is important to ensure the loss of a deal does not mean abandoning all growth plans and opportunities.



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