M&A failings and types of suitors

Having looked at the reasons for, and pitfalls of, selling a company, business mentor Colin Turner examines why most M&A deals fail to complete.

He looks at the common factors associated with successful M&A and the best suitors to link with.

There a host of reasons for the failure of mergers and acquisitions. These include poor due diligence prior to sale and the failure to address human issues such as company culture and teamwork ethic.

The mergers, acquisitions and takeovers that succeed are the ones that harness complimentary strengths, such as when both the seller and the buyer are in the same industry but enjoy different strengths. One may be good at production while the other merits retailing. They will have a shared vision for the company and similar outlook on the integration.

Management buy-outs can work well because the management understands the business and knows the potential. Yet from the owner’s position, they must still be treated as a suitor, not a special case. It’s the old mixing business with pleasure adage: ultimately you are looking for the best deal for you.

Dropping the price by 20 per cent because you are colleagues and have worked together for years is not good policy. It is you that has taken the risk. And if the new business does not do well, even perhaps because the new owners have had a special deal, they will still blame you for selling them a bad deal.

There are typically three types of suitors in the majority of M&A deals. The first are those that understand your business and recognise its success and acknowledge any future potential. These suitors are usually competitors or seasoned serial entrepreneurs.

Secondly there are those that do not necessarily understand your business, yet view your business as a cash cow to milk, asset strip and make a quick profit. These suitors are usually investors, or entrepreneurial raiders.

Lastly there are those that understand your business and are seeking to enjoy a healthy income and are enthusiastic about developing the potential that exists. These suitors are usually ex-corporate individuals that have either been made redundant or received a golden handshake or bonus and want to be their own boss. Sometimes they are also younger entrepreneurs looking to have their own business.

The best sale usually comes from a competitor or seasoned entrepreneur. The former understands the business, the latter will know the risks, yet is prepared to take them because of the potential, and usually based on the new angle the entrepreneur has identified that has been overlooked.

But remember how ever friendly they appear, they are still a competitor and, the truth be known, want you out of their business. This makes them a good suitor of course.

Business mentor, Colin Turner, can be found at

Hunter Ruthven

Hunter Ruthven

Hunter was the Editor for GrowthBusiness.co.uk from 2012 to 2014, before moving on to Caspian Media Ltd to be Editor of Real Business.

Related Topics

Management buyout