The Merger Mirage: The Triumph of Hope over Experience

Synergy. Market expansion. Gaining share. Cost savings. Diversification. Talent acquisition. Owning a unique asset. Moving into a high-growth sector. These and many more reasons have often propelled companies into one another’s arms, regardless of the generally dismal track record such combinations reveal.

The Persistent Paradox of M&A Failure

Here’s a puzzle that should keep every boardroom awake at night: Between 70% and 90% of mergers and acquisitions fail to deliver their promised value, yet in 2024 alone companies spent over $2.6 trillion annually chasing the merger mirage. This isn’t just a statistic — it reveals the same kind of breakdowns in planning for big things that we also see in the systemic failures of mega projects and in my own work on major corporate innovations that went terribly, terribly, wrong, landing them in my “flops file.”

The big weakness? Taking untested assumptions as facts. Making a big decision all at once without the opportunity to course-correct. Taking too long to reach a result with the effect that the time for risks to emerge expands broadly. And often, leaders personally associated with the strategy that led to the decision, opening the window for all kinds of cognitive and social biases, including the famous “escalation of commitment to a…