Facing Uncertainty In M&A Strategy

Facing Uncertainty In M&A Strategy

Mergers and acquisitions deals often come with uncertainty. There are uncertainties in understanding the target business, the macro-economic indicators, and the risks within the industry. With so many uncertainties inherent in such deals, i often use a framework to declutter the information and bring some order to the chaos.

I apply the simple framework of drawing a box with four cells. Each cell represents your perception of information on a topic regarding conscious and unconscious understanding. So, one cell is “what you know you know,” and a second is “what you know you don’t know.” For this exercise, the most crucial cell is “what you don’t know, you don’t know” (the pure unknown).

Leaders vary significantly in dividing the box into these four areas. The most mature and experienced decision-makers are typically found to be those who believe the pure unknown is enormous and need to factor in time and open-mindedness to deal with that uncertainty.

In my experience, in deals that failed, more than 75% of instances, I knew we didn’t understand the target business and could have obtained further information that might have changed the approach, if not the decision itself.