Why 80% of Deals Fall Through

Deals that involve either acquiring or merging with another business entity or organization shall always have some level of risk attached to them. However, this does not mean that there is nothing that be done to lower the risk. There are a number of ways though which even a failing deal can be brought back to the table and closed successfully. That will be the topic of another day.

Today we look at the reasons that make deals to fail. This is in spite of very careful preparation and carrying out due diligence. Some you might already know while some might be new to you. Make sure to read all of them so you can see which ones to alleviate in your next deal.

Unpredicted Economic Elements

Even the most careful of plans can be overcome by external economic factors. The shifts in the prevailing economic environment can make a hot deal to fail even after long hours, weeks and months of planning. This reason is usually out of control for either party to the deal and you should never feel bad if it catches up with you someday.

Poor Strategy

A strategy and plan that is not airtight is likely to make even a hot deal fall through. Failing to capture and consider small details could easily give way to a big crack in the deal leading to failure. This is common with those kind of deals that are drawn but fail to anticipate for the aftermath of a merger or acquisition.

Merging Hurdles

Not a single well-formulated deal is likely to fail on paper. However, pulling the resources including human resource and company culture of the newly formed entity together after the deal is done is a whole different thing to successfully realize. The productivity of the merged entity can easily go down due to the uncertainty that comes at the time of the deal.

Improper Valuation Statistics

The potential parties to a deal are, most of the time, anxious and badly in a hurry to close the deal. As a result, they can easily overlook some financial details that might lead to a bad deal. The seller can easily make the deal too good to be true and the buyer fail to notice that. This is precisely when the anxious buyer might overlook an over valuated business.

Inadequate Principal Participation

Most mergers and acquisitions are handled by experienced professionals. The owners of the businesses are not directly involved most of the time. The new owners might not know what to fully anticipate since they did not have enough time to interact with the previous owner. This kind of a deal constitutes a bad deal since it lacks deeper understanding.