magine that you have just walked out of a grocery store. After braving steady wind, narrow aisles, and long lines, you successfully purchased a dozen organic, brown eggs. Despite the colorful package and the many labels confirming that you have made the “right” choice, you quickly realize that you are $10.99 poorer. Buyer’s remorse, or that feeling of regret after a purchase is made, has already started to set in.

While buyer’s remorse can manifest under many different circumstances, the cause is often the same: a disconnect between the expected outcome and the actual outcome of a purchase. This is especially true in mergers and acquisitions (M&A). Consider a failed merger or acquisition: up to 75 percent of all corporate mergers and acquisitions fail. A failed merger or acquisition occurs when 1) an M&A deal does not close or 2) an M&A deal closes but fails to deliver anticipated results. Buyers who experience the latter are often thought of as having buyer’s remorse.

This article will help buyers avoid remorse by examining why most mergers and acquisitions fail and how that failure can be prevented.

In 2024, global M&A volume reached $3.4 trillion, which is 15 percent greater than the volume in 2023. Generally speaking, the M&A market saw a shift toward fewer but higher-value deals in 2024, with corporate mergers dominating the landscape.

Because M&A allows a business to gain faster access to resources, growth, and innovation, it is reasonable to say that M&A is integral to every industry in every economy. Unfortunately, a merger or acquisition can fail for a number of reasons.

Once you ignore the outliers, or those M&A deals that fail due to a declining industry (such as the 1968 merger of the New York Central Railroad and Pennsylvania Railroad, which resulted in the surviving corporation, Penn Central, filing for bankruptcy just two years later) or those M&A deals that fail due to economic upheaval (such as the 2001 megamerger of America Online and Time Warner, which resulted in the largest annual net loss reported of $99 billion after the dot-com bubble burst), it is easy to spot a pattern. Simply put, most M&A failures can be attributed to the lack of attention given to integration.

Admittedly, integration is the least attractive component of the M&A process. Think of integration as the equivalent to unloading your eggs once you arrive back from the grocery store or making sure that none of the eggs cracked on the ride home. Even after you have gone through the painstaking process to ensure that you have chosen the “right” eggs for the “right” price, integration requires you to walk through your weekly menu and re-confirm that you will use every single egg that you purchased.

Integration is tedious but critical to a successful M&A deal, as it will determine if a buyer’s anticipated results can be reached. What does integration look like in the M&A context? M&A integration involves the blending of two or more companies into one. It is the process of repurposing the operations, systems, culture, policies, and procedures of the target business to perform and operate as a function of the buyer. While the actual integration process happens after a M&A deal closes, integration issues and solutions are identified well before then.

Integration issues are generally categorized as either “hard issues” or “soft issues.” Hard integration issues are those tangible issues that can be quantified, such as financial and operational performance or legal compliance. Soft integration issues are those intangible issues that are difficult to quantify, such as culture, communication, leadership, and organizational structure. Without assigning equal importance to both the hard and soft issues of integration, a buyer will not accomplish a successful M&A deal.

To illustrate, consider two common M&A integration issues: unexpected operating expenses and talent retention.

Unexpected operating expenses is a hard integration issue that is easy to quantify and therefore easy to identify. Some buyers will attribute surprise operating expenses to the inevitable costs of buying a business. However, that is not always the case. For instance, buyers who are interested in a merger or acquisition of a seasonal Alaska business typically account for fluctuations in workforce, demand, materials, and equipment. After all, Alaska’s economy is highly seasonal, with many industries such as tourism, construction, fisheries, and agriculture all experiencing a significant lull in operations in the winter months. That said, the ability for seasonal businesses to operate lean during off-peak seasons may not be feasible after closing, which may result in unexpected operating expenses for the business going forward.

Similarly, consider buyers who are interested in a merger or acquisition of an Alaska small business. As we know, Alaska has a vibrant small business community, with nearly 75,000 small businesses operating in the state. One key (albeit obvious) characteristic of small businesses is their small number of employees. As a result, most small businesses do not have robust back-office support, and that often impacts the businesses’ ability to know about and comply with applicable state and federal regulations. For buyers of small businesses in Alaska, that means a greater chance of unexpected operating expenses after closing due to regulatory penalties or legal fees.

While unexpected operating expenses are a common occurrence in M&A, they are not commonly considered as part of an integration strategy and therefore tend to decrease the probability of an acquired business reaching anticipated results after closing.

In contrast, talent retention is a soft integration issue that often goes ignored. While most would consider the “talent” of a business to be its key employees or the president, CFO, or general manager, the success of a merger or acquisition often depends on a much broader pool of employees.

Consider the impact of employees on the economy. Notably, the world’s economy is dominated by the service sector. That fact is even more true in Alaska, with some of the largest contributors to Alaska’s gross domestic product coming from service industries. Given how crucial service is to the Alaska economy, it is clear that the most critical asset held by Alaska businesses is no longer their contracts, equipment, or facilities but their employees.

Andrea N. Canfield is a corporate partner at Stoel Rives. She advises private companies, including large conglomerates, such as Alaska Native Corporations, in mergers, acquisitions, and other strategic corporate transactions. She can be contacted at andrea.canfield@stoel.com