Why Do Inorganic Initiatives Fail?

Every year, billions of dollars are spent on transactions aimed at fueling company growth. Yet, the statistics are clear: the majority of these efforts end in failure, particularly in M&A. Everyone has their theories, but failures persist. Having worked on dozens of transactions across five different corporate development teams, I’ve identified three key reasons for these outcomes.

1. Wrong Strategy: Companies succeed by identifying future opportunities, crafting a strategy to capitalize on them, and committing sufficient resources to execute the plan. A failure in any of these areas leads to strategies doomed from the start. It’s crucial for organizations to invest in frameworks and processes that mitigate these risks. Without them, not only are millions—sometimes hundreds of millions—of dollars wasted, but valuable resources are also squandered during the process.
2. Lack of Conviction: Even with executive consensus on an initiative, competing priorities often overshadow new efforts over time. I’ve seen this happen before transactions even close. More commonly, resources are diverted away from new initiatives after just a few quarters, stifling their chances of success. True commitment requires the courage to support efforts that may not yield significant results for at least a year or two.
3. Choosing the Wrong Partner: Even with thorough diligence on the product, solution, and management team, unforeseen issues often arise post-transaction. Misalignments in technology, product roadmaps, or management personalities can derail expectations. Therefore, robust pre-close diligence frameworks and processes as well as post-close mitigation plans are essential to minimize these surprises and course correct, if possible, when they do arise.

This is why so many inorganic growth initiatives fail. A setback in any of these areas can lead to less-than-ideal outcomes. It’s vital to have an experienced leader who has successfully navigated these challenges to guide the team through these initiatives. With tremendous dollars and resources at stake and the potential to miss out on critical growth opportunities, the cost of failure is simply too great to ignore.