Managing Director Galina Wolinetz, who has leads Virtas Partners’ M&A Integration Practice, was quoted extensively about organizational risks in M&A in Middle Market Growth’s “Concern About Risk Deepens Among Midsize Business Leaders.”
Failure to properly integrate the new organization can result from management taking their eyes off the ball after the deal closes. “What I see is a lack of focus, deployment of resources and leadership’s interest in integrations,” Galina said in the article. “Everybody’s very excited about getting the deal done, and then somebody has to run the combined company, but the focus and resources are gone.”
Before initiating a deal, the buyer has likely developed a strategic rationale and a financial forecast, but often does not follow through with steps required to integrate the acquired organization. Galina recommends that leadership teams identify owners and specific initiatives related to all aspects of the desired outcomes of the deal, to make sure they’re achieved.
Poor communication after an acquisition is another common reason M&A deals fail to deliver full value. Employees of the acquired entity are left in the dark about what the transaction means for the business and them personally. Uncertainty created by lack of transparency can lead to the loss of valuable talent. If those employees’ contributions were factored into financial forecasts, the synergies the acquirer was counting on could be compromised.