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How M&A Due Diligence Goes Wrong

Joe Mont | January 27, 2015

Mergers and acquisitions have been a popular growth strategy in recent years, as record-low interest rates and healthy stock market give senior executives ample capital to do a deal.

That being said, plenty of M&A deals still fail. According to Bloomberg, $390 billion in deals fell apart in 2014. In recent years, anywhere from 5 to 13 percent of all M&A deals failed, and some say the rate could hit as high as 20 percent in 2015.

Deals collapse for many reasons, from regulatory disapproval to clashing CEO egos. Most painful, however, is a deal is consummated quickly that later proves to be a mistake.

Perhaps employee cultures clash, the target company is runs afoul of regulators, technologies don’t integrate, or the books were cooked. All are problems that could be sniffed out with proper due diligence, but pre-purchase investigations often miss the mark.


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