Why Acquisitions Disappoint, and What the Board Should Ask

Most acquisitions that disappoint fail for reasons that were visible before the vote. The board's task is not to master the tools that expose those reasons, but to see what the tools found before it approves the deal.

In Brief

The Problem. Acquisitions are the largest capital decisions most boards make, and research has long found that most fail to deliver the value expected of them.

Why It Persists. The causes of failure are well known and the tools to test them are mature, but their results often reach the board late, in summary, or not at all. Momentum, not ignorance, carries weak deals through.

What Boards Should Do. Ask management to show, before the vote, how each of the common causes of failure was tested, what the test found, and who will answer for it after closing. Record the questions, the answers, and the conditions attached to approval.

Mergers and acquisitions (M&A) remain a powerful way to accelerate growth, enter new markets, and acquire capabilities. Global deal value rose 40 percent in 2025 to USD 4.9 trillion, the second-highest annual total on record. In the first five months of 2026, strategic deal value rose 36 percent, and healthcare and life sciences were among the sectors that contributed the most growth in absolute deal value (Bain and Company, 2026). The record on results is less encouraging. Christensen and colleagues put the failure rate of mergers and acquisitions between 70 and 90 percent (Christensen et al., 2011). Estimates of this kind depend on how failure is defined, and I treat the range as a warning rather than a measurement.

Over a career in which I have directed more than USD 2.4 billion in transactions, I have found that the causes of failure are rarely hidden. Research and practice point to the same 15, and each has established tools for testing it. My argument is that deals seldom fail because no one ran the analysis. They fail because the board approved the deal without seeing what the analysis found, or without asking who would answer for it after closing. The board does not need to run the tools. It needs to see their output before it votes.

15 Causes, in Five Groups

The causes fall into five groups: strategy and price, diligence, people and culture, execution, and regulation and governance. For each cause below, I describe how it leads to failure, the tools management can use to reduce it, and what the board should see.

Strategy and Price

Poor strategic rationale. When the reasons for a deal are not well founded or do not fit the company's long-term goals, the combined company struggles to reach its objectives. Management can test strategic fit with a strengths, weaknesses, opportunities, and threats (SWOT) review, an analysis of political, economic, social, technological, environmental, and legal (PESTEL) factors, and Porter's five forces, which examine rivalry, supplier and buyer power, new entrants, and substitutes (Porter, 2008). Scenario planning tests the deal against uncertain futures, and game theory tests how competitors are likely to respond. Christensen and colleagues add a distinction every board should apply. Some deals improve the current business model, usually through scale and cost; others use the target's model as a platform for new growth. They warn against overpaying for the first kind and undervaluing the second (Christensen et al., 2011). The board should see the rationale stated in one paragraph: what the combined company will do that neither could do alone, and how the board will know within two years whether that happened.

Misaligned expectations. When the parties hold different assumptions about a deal's outcomes, conflict follows. The balanced scorecard can align objectives and measures across both organizations, because it links financial results to the customer, process, and learning measures that drive them (Kaplan and Norton, 1992). Joint workshops and simulations test whether both sides understand the goals. Decision analysis and Monte Carlo simulation show the range of likely outcomes and their probabilities. The board should see one agreed set of measures, not two.

Overvaluation. Overpayment is the cause that no integration plan can recover. Walgreens Boots Alliance invested USD 1 billion in VillageMD in 2020 and USD 5.2 billion in 2021 for a majority stake, and VillageMD then acquired Summit Health and CityMD in a deal worth close to USD 9 billion (Landi, 2024). On March 28, 2024, Walgreens reported a USD 12.4 billion impairment of VillageMD goodwill, USD 5.8 billion after tax and non-controlling interests (Walgreens Boots Alliance, 2024), and VillageMD planned to close 160 clinics (Landi, 2024). Real options analysis values the flexibility a deal creates or removes. Benchmarking against comparable transactions and industry multiples tests whether the price is reasonable. Sensitivity analysis shows which assumptions drive most of the value. Directors should see the valuation under more than one set of assumptions, and a walk-away price agreed before negotiations reach their final stage. A board that approves a price above that figure should record why.

Poor market timing or conditions. A deal closed into a downturn can lose growth, raise costs, and magnify existing problems. Purchasing managers' indexes and other leading economic indicators help management read conditions. Building the capability to adapt helps the combined company respond. Countercyclical strategies, such as acquiring distressed assets in a downturn, can turn timing into an advantage. The board should ask how the deal performs if conditions worsen in the first two years.

Diligence

Inadequate due diligence. When the acquirer does not investigate the target thoroughly, liabilities and complications surface after closing. Management should run cross-functional diligence, with finance, operations, human resources, legal, and technology all represented. Forensic accounting and fraud detection reduce the risk of hidden liabilities. Technology and security belong in the same review. UnitedHealth Group acquired Change Healthcare in 2022 for nearly USD 8 billion. In February 2024, attackers entered Change's systems through a remote access portal that did not have multifactor authentication (Witty, 2024), and UnitedHealth's chief executive told Congress that Change ran on legacy technology, some of it about four decades old, that the company had been working to improve (Tozzi, 2024). The breach affected approximately 192.7 million individuals (U.S. Department of Health and Human Services, Office for Civil Rights, 2025). The board should ask what diligence found about the target's security controls and what the integration plan does about them in the first year. Advanced analytics and artificial intelligence (AI) now speed the work: Bain reports that leading programs use AI to identify and confirm cost-synergy opportunities two to three times faster than traditional outside-in diligence (Bain and Company, 2026). Speed helps. It does not replace the judgment of the people who sign the representations.

In health and life sciences, diligence must also reach assets that barely registered when I first wrote this article. More of a target's value may now sit in data, algorithms, and AI-generated evidence than in plants or contracts. Diligence should establish who owns the data, whether the licenses permit model training, how the target's models were validated, and what regulatory commitments rest on them. The board should ask whether those four questions were answered, and by whom.

People and Culture

Cultural misalignment. Incompatible cultures lower morale and productivity and can leave a dysfunctional combined company. The Organizational Culture Assessment Instrument (OCAI), developed by Kim Cameron and Robert Quinn on the Competing Values Framework, lets management compare the two cultures systematically (OCAI Online, n.d.). Kotter's account of why transformation efforts fail is a sound guide to leading the change that follows (Kotter, 1995). Organizational network analysis shows where informal influence sits and where cultural barriers are forming. The board should see the culture assessment before the vote, not after the first resignations.

Loss of key personnel. When critical people leave during or after a deal, operations suffer and knowledge walks out the door. Talent analytics identify the people who matter most. Retention programs, such as stay bonuses, accelerated vesting of equity awards, and tailored career plans, give them reasons to remain. Succession planning limits the damage when someone leaves anyway. In my experience, the loss of key clinical, scientific, or technical staff is often the first sign of trouble in an integration, and it is easier to prevent than to repair.

Ineffective communications. When the companies do not communicate clearly and promptly with employees and other stakeholders, confusion and anxiety fill the gap. Management needs a crisis communication plan for negative developments, digital channels that reach employees and stakeholders quickly, and a clear account of the strategic rationale told in terms people can relate to. The board should ask what employees, patients, and customers will hear on the day the deal is announced, and from whom.

Insufficient leadership accountability. When no senior leader owns the result, direction drifts and decisions suffer. A performance management system with measures tied to the deal's objectives holds leaders to account. A culture in which people can report problems without fear brings bad news forward early. A leadership development program builds the capability to integrate. The board should name one executive accountable for the deal's results and see that person's measures.

Execution

Inadequate integration or execution. Poorly planned integration disrupts operations, loses people, and forfeits synergies. Integration also takes longer than most deal timetables assume. Bain finds that deals above USD 10 billion take roughly seven months from announcement to close, then 24 to 36 months to realize most of their run-rate cost synergies (Bain and Company, 2026). Management should prepare an integration playbook that sets out steps, milestones, and owners for each function. Agile project methods help the plan adapt, and change models such as Kurt Lewin's three stages of unfreezing, changing, and refreezing help people through the transition. The board should set the measures it will review at each meeting for that full period: retention of key staff, synergy capture against plan, and risks that have changed.

Insufficient project management. Without disciplined project management, deals run late, over budget, or short of their goals. Gantt charts and work breakdown structures give visibility and control. A project governance structure defines roles, responsibilities, and decision rights. Established methods such as PRINCE2 and the Project Management Body of Knowledge (PMBOK) bring rigor. The board should see the integration plan's critical path and its status at each meeting.

Insufficient financing. An acquirer that lacks the funds to complete a deal or support the combined company faces financial strain and operational disruption. Financial modeling and scenario analysis establish the capital the deal requires. A mix of debt, equity, and hybrid instruments can lower the cost of capital. Steady investor relations maintain the confidence of current and future investors. The board should see the financing plan under a downside case, including covenant headroom.

Inadequate risk management and contingency planning. Risks that are not identified, assessed, and addressed become surprises. The Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework, Enterprise Risk Management: Integrating with Strategy and Performance, gives management a structure for identifying and responding to deal risks (Committee of Sponsoring Organizations of the Treadway Commission, n.d.). Scenario planning and stress testing show what adverse events would do and shape contingency plans. A dedicated risk function, staffed with experienced people, keeps watch after closing. The board should see the top deal risks, their owners, and the contingency plan for each.

Regulation and Governance

Imposed regulatory constraints. Regulators can impose conditions that delay a deal, raise its cost, or end it. Illumina completed its acquisition of GRAIL on August 18, 2021, while the European Commission's review was still under way and the Commission maintained that a standstill applied (Illumina, 2021). The Commission prohibited the acquisition on September 6, 2022 (Illumina, 2022). Illumina completed the separation of GRAIL into an independent public company on June 24, 2024, and reported significant costs to complete it (Illumina, 2025). Domestic review can end a deal as well. In June 2024, Novant Health abandoned its USD 320 million purchase of two North Carolina hospitals from Community Health Systems after the Federal Trade Commission (FTC) obtained an injunction pending appeal from the Fourth Circuit (Muoio, 2024). Scrutiny in health care has also widened beyond antitrust agencies: at least 13 states now have healthcare transaction review laws; some require advance notice of material healthcare transactions, and others require a cost and market impact review (Sidley Austin, n.d.). Compliance technology can reduce the burden of filings. Early, transparent engagement with the authorities that will review the deal reduces surprises. Alternative structures, such as joint ventures or partnerships, can avoid some obstacles altogether. The board should ask which authorities will review the deal, what remedies they might require, and what the deal is worth if those remedies apply.

Poor governance and stakeholder management. When the companies fail to engage investors, employees, customers, suppliers, and regulators, interests diverge and support erodes. A sound governance structure, including separation of the chief executive and chair roles where it suits the company, supports objective oversight. Regular engagement with key stakeholders builds trust. A dedicated transaction committee of the board, supported by independent advisers, can oversee the process from approval through integration. The board should decide, before the vote, which committee owns the deal after closing.

The Strongest Objection: Deals Are Management's Business

A fair objection is that boards should not second-guess management on transactions. Management knows the business, the target, and the market; directors meet a few times a year. The business judgment rule protects directors who approve a deal in good faith, so detailed questioning may only slow a competitive process.

The business judgment rule protects informed decisions, not decisions made without information. In Smith v. Van Gorkom, the Delaware Supreme Court held that directors who approved a cash-out merger after about two hours, relying on the chairman's oral presentation and without valuation information, had not reached an informed business judgment and were grossly negligent (Smith v. Van Gorkom, 1985). The questions in this article do not ask the board to run the deal. They ask it to see what management found, which is the condition on which the board's protection depends. Nose in, fingers out.

The Board's Record

None of these causes is new. What has changed is the share of value that sits in data and AI, the number of authorities that review healthcare transactions, and the scrutiny that follows when a deal fails. The board's protection in a transaction is the same as in any oversight matter: the record of what it asked, what it was told, and what conditions it set.

For the Board

• What will the combined company do that neither could do alone, and how will we know within two years?
• What is the walk-away price, and which assumptions drive most of the value?
• Did diligence establish ownership, license terms, and validation for the target's data and AI models, and the state of its security controls?
• Which people are critical to the deal's value, and what will keep them?
• Who is accountable for integration through full synergy capture, and what will the board review at each meeting?
• Which authorities, including state healthcare transaction regulators, will review the deal, and what is it worth if they impose remedies?

To discuss transaction oversight with your board, book a conversation.

References

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Christensen, C. M., Alton, R., Rising, C., and Waldeck, A. (2011). The big idea: The new M&A playbook. Harvard Business Review, 89(3). https://hbr.org/2011/03/the-big-idea-the-new-ma-playbook

Committee of Sponsoring Organizations of the Treadway Commission. (n.d.). Enterprise risk management. Retrieved October 21, 2026, from https://www.coso.org/enterprise-risk-management

Illumina, Inc. (2021). Form 8-K [Current report dated August 18, 2021, reporting completion of the GRAIL acquisition]. U.S. Securities and Exchange Commission. https://www.sec.gov/Archives/edgar/data/1110803/000095015721000850/form8-k.htm

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Illumina, Inc. (2025). Form 10-K for the fiscal year ended December 29, 2024. U.S. Securities and Exchange Commission. https://www.sec.gov/Archives/edgar/data/1110803/000111080325000019/ilmn-20241229.htm

Kaplan, R. S., and Norton, D. P. (1992). The balanced scorecard: Measures that drive performance. Harvard Business Review, 70(1). https://hbr.org/1992/01/the-balanced-scorecard-measures-that-drive-performance-2

Kotter, J. P. (1995). Leading change: Why transformation efforts fail. Harvard Business Review, 73(2). https://hbr.org/1995/05/leading-change-why-transformation-efforts-fail-2

Landi, H. (2024, March 28). Walgreens narrows profit outlook for 2024, takes $6B hit in Q2 from VillageMD investment. Fierce Healthcare. https://www.fiercehealthcare.com/retail/walgreens-takes-6b-hit-q2-villagemd-investment

Muoio, D. (2024, June 18). Novant Health gives up $320M hospital deal after FTC secures appeals court injunction. Fierce Healthcare. https://www.fiercehealthcare.com/providers/novant-health-gives-320m-hospital-deal-after-ftc-secures-appeals-court-injunction

OCAI Online. (n.d.). About the Organizational Culture Assessment Instrument (OCAI). Retrieved October 21, 2026, from https://www.ocai-online.com/about-the-Organizational-Culture-Assessment-Instrument-OCAI

Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard Business Review, 86(1). https://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy

Sidley Austin. (n.d.). Healthcare transaction review laws. Retrieved October 21, 2026, from https://www.sidley.com/en/sidley-pages/healthcare-transaction-review-laws

Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985). https://law.justia.com/cases/delaware/supreme-court/1985/488-a-2d-858-4.html

Tozzi, J. (2024, May 2). UnitedHealth hack put data of one in three Americans at risk. Insurance Journal. https://www.insurancejournal.com/news/national/2024/05/02/772540.htm

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Walgreens Boots Alliance. (2024, March 28). Walgreens Boots Alliance reports fiscal 2024 second quarter results [Press release, Exhibit 99.1 to Form 8-K]. U.S. Securities and Exchange Commission. https://www.sec.gov/Archives/edgar/data/1618921/000119312524079608/d817592dex991.htm

Witty, A. (2024, May 1). Testimony before the Subcommittee on Oversight and Investigations, Committee on Energy and Commerce, U.S. House of Representatives: Examining the Change Healthcare cyberattack. https://democrats-energycommerce.house.gov/sites/evo-subsites/democrats-energycommerce.house.gov/files/evo-media-document/Testimony_Witty_OI_2024.05.01.pdf