The normal failure rate of at least 50% in corporate M&A is unacceptable. Trillions of dollars are wasted every year in failed M&A deals that should never have been considered in the first place. This high failure rate destroys small and medium businesses, devalues big corporates, and ruins careers.
So why do so many highly educated, bright, and well-paid people spend so much time on corporate M&A when the outcome would be the same if they just flipped a coin? Why do so many students spend years at university, only to end up in a career where there is at most a 50% chance of success?1
This question has been bothering us for many years, as we struggled to understand how any CEO or any owner of a small or medium-sized enterprise (SME) could allow these high failure rates to stand. During Peter's corporate tenure at FrieslandCampina, there was not one single failed M&A transaction; no acquisition was ever regretted and every deal was reasonable in line with synergies set at the binding offer stage.
By this point, Peter had more than 25 years' experience working in corporate M&A (both buy-side and sell-side), and he realized that a pattern was starting to emerge. He began to interview M&A peers in companies which had a history of making close to 500 successful acquisitions, asking each one the same three questions: