Copyright forbes
M&A can accelerate growth, but leaders need to address uncertainties that hurt talent retention. AFP via Getty Images With 2026 expected to be a strong year for M&A, according to Goldman Sachs, acquisitions will once again be on the rise. While many companies pursue acquisitions from time to time, some are attempting to accelerate their growth through multiple transactions. As McKinsey observes, those making “more than five deals per year grow at double the rate of companies that only selectively pursue M&A.” Based on my more than four decades in leadership and having made or advised firms on more than a hundred acquisitions, I can attest that increasing the pace of M&A may jumpstart growth, but with that comes greater risks. Studies reveal that an estimated 70-75% of acquisitions fail and, in some cases, the rate may be as high as 90%. Failure means that the acquired company did not deliver the intended return — in other words, the value it generated did not live up to expectations (or the price paid). These statistics, alone, should sound a warning bell for business leaders — not to avoid acquisitions but to increase the risk management for every deal they make. One of the basic tenets of M&A is conducting due diligence to review a company’s operations, profitability, and cash flow to determine its suitability as an acquisition target and the appropriate price to pay for it. However, there are considerations that go beyond the balance sheet. This is a lesson I learned earlier in my career. As I related in a recent column, when I was promoted to a division president many years ago, I believed that everything we needed to know about an acquisition target could be found in the numbers. Given my finance background and my experience as an analyst, that perspective made complete sense to me. For example, let’s say our analysis valued a company we wanted to acquire at $100 million. Therefore, we offered $80 million, meaning we expected to capture $20 million in value. MORE FOR YOU What I neglected to take into account, however, were several factors that would have provided a much more holistic view — ensuring that key people at the acquired company stayed on to manage the operations. Overlooking that detail greatly elevated the risk of doing the deal. Many of the key people ended up departing soon after the transaction closed. Productivity suffered and that business we bought for $80 million ended up being worth no more than $40 million. Although unsuccessful, that acquisition became a valuable lesson in M&A. Here are some takeaways: 1. Acquisitions create uncertainty. Acquisitions are a perfect scenario for encountering any number of unknowns. First, there are significant macro uncertainties that can affect the value of an acquisition, such as tariffs and their impact on global economic growth. Beyond the external factors, uncertainties also exist within the acquired company. For example, upon learning that their company is about to be acquired by another (and presumably larger) organization, people wonder what will happen to their jobs. Who will be their boss? Will they have to relocate? The more these uncertainties linger, the more people will worry about their future. As I tell my students in my MBA classes: Change + Uncertainty = Chaos. That’s why business leaders need to do everything possible to limit the uncertainty and avoid the chaos that can derail a promising acquisition. 2. Beyond culture fit, it’s making people feel comfortable. Culture fit is often cited as being crucial to helping ensure the success of an acquisition. When the acquiring company and the acquisition target have compatible values and their mission statements align, these factors contribute to a successful integration of their operations. Beyond culture fit there are other considerations such as helping people feel comfortable during and after an acquisition, by anticipating and addressing uncertainties. For leaders, this means engaging in self-reflection such as to ask: What are people going to do for all those months until they know the impact of the acquisition? How will they deal with the uncertainty around whether or not they will have a job? My advice is to increase the frequency of communication: telling people what you know, what you don’t know as yet, and when you will get back to them with more answers. Without transparency and clarification, the best people will leave — and that’s exactly the talent that needs to be retained. 3. Prioritize retention of valued talent. When people with critical skills, expertise, and institutional knowledge depart, the acquired company suddenly doesn’t have the depth of talent, and its operations suffer. The opposite is also true. McKinsey calls it “acqui-hiring” — meaning a business is acquired largely for its talent, which provides immediate access to “a seasoned team with relevant capabilities who can hit the ground running.” With the right talent on board, time-to-market for new products can be accelerated. The lesson: understand the value of the talent within the acquired company and prioritize retention. 4. Encourage a healthy attitude toward failure. Of course, no one should go into an acquisition — or any business expansion or product rollout — expecting to fail. But some setbacks are natural. Minimizing their impact, while also maximizing the lessons learned, can foster a healthy environment that encourages greater innovation. However, if people sense there is an intolerance for failure, they will be reluctant to even suggest something new and different, let alone implement it. As a young leader, I learned this lesson from William Graham, the long-time CEO of Baxter International, where I spent more than two decades of my career. He acknowledged that failure was part of growth, but emphasized two important points: “First, when you fail, make sure you learn a lot, so you don’t repeat that failure. Second, when you fail, try to fail early.” There are many ways to apply this thinking, such as having month-to-month plans with specific objectives to be met. If after a few months an initiative is behind on its deliverables, the decision can be made to put an end to the project and deploy the capital elsewhere. Or, based on what’s been learned from initial failures, investment can be accelerated to complete the project successfully and ahead of schedule. When companies are creating change, such as by making an acquisition, it’s imperative to take calculated risks in the context of the potential return. Beyond the numbers, there is an all-important human factor. By anticipating people’s questions, allaying their fears, and acknowledging their contribution to the company, leaders can reduce the uncertainties — and retain the talent they need for success. Editorial StandardsReprints & Permissions
