Communication is a make-or-break in M&A deals
Here’s an M&A scenario that might resonate: You’re in the final stages of a complex merger. Due diligence is complete, the integration plan is in place, and the announcement is ready. Then disaster strikes – a crucial valuation update gets buried in someone’s inbox, a material change in the target company’s financials is lost in a WhatsApp message, and suddenly, the whole transaction is in jeopardy. Sound familiar?
Many M&A analysts know that good communication isn’t just important in high-stakes deals – it’s make-or-break.Communication gaps can cost M&A companies their competitive edge.
Yet closing these communication gaps in M&A dealmaking is easier than you might think.
At last – a measurement of the costs of poor communication
While the concept of poor communication is well-documented, its measurable impact is not.
Our new study in collaboration with respected research house Statista has taken a deep dive into the costs of poor communication in M&A transaction management, measuring the time, money, trust, and confidence lost. 50 M&A managers were surveyed via in-depth, structured telephone interviews. The results reveal significant losses in efficiency and effectiveness, prompting dealmakers and M&A analysts to seek new ways to enhance transaction management communication.
Key success factors in M&A transaction processes
The research confirms that effective communication is number 1 of the top 5 factors vital for successful M&A deal management. It also plays a large role in the other 4:
- Effective communication (e.g. cooperation between the parties)
- Transparency between the parties
- Speed of the process
- Data security
- Adherence to legal regulations and compliance guidelines
The M&A communication paradox
Here’s the surprising paradox the study uncovered: While communication is rated as the most critical success factor in M&A transactions, it’s also the source of the biggest obstacles. It’s like saying due diligence is crucial for a successful merger but conducting perfect due diligence is extraordinarily difficult.
Let’s break down some eye-opening stats from our research for M&A professionals:
- 76% say aligning and collaborating with stakeholders (executives, lawyers, accountants, regulators) is their greatest challenge
- 68% struggle with the large number of stakeholders involved in merger transactions
- 66% find the complexity of M&A transaction processes challenging
- 58% cite a lack of transparency as a major issue
M&A professionals are drowning in communication channels
And if that wasn’t complicated enough, M&A professionals are overwhelmed by the sheer number of communication channels. While email remains universal (used by 100% of respondents), 86% rely on phone calls, 74% use video conferencing, 60% employ centralised platforms, and 24% are even using WhatsApp. The extensive use of Microsoft Teams, Slack and WhatsApp is particularly worrying and raises red flags around security and compliance.
This fragmentation creates the perfect conditions for miscommunication. Consider this: An important update about a liability discovered during due diligence, shared in a Zoom call, might never reach the email chain where decisions are being documented. A crucial question about post-merger integration asked via WhatsApp might never reach the team member who has the answer.
The study found that 40% of M&A respondents report frequent or occasional misunderstandings and information loss due to this “multi-channel mayhem.” It’s like playing a high-stakes game of communication roulette but with multi-million-dollar deals on the line. And with the average M&A deal taking 9 months to complete, the potential for error is huge.
“Sorry, I didn’t see that email” – the high cost of missed messages in M&A
We’ve all used that excuse, but in the world of high-stakes mergers and acquisitions, it comes with a shockingly high price tag.
The study found that communication inefficiencies lead to:
- Delays in decision-making about deal structure or pricing (82% of respondents)
- Delays in due diligence and closing processes (80%)
- Information loss about target company conditions or liabilities (72%)
- Misunderstandings about deal terms or integration plans (70%)
Notably, 64% of M&A respondents reported that additional costs were incurred due to communication problems during the transaction process. And most alarmingly, 46% of M&A analysts have seen deals delayed, jeopardised, or outright fail due to communication problems. That’s nearly half of all transactions potentially derailed by something as seemingly simple as communication!
Time is money, don’t waste either
If you’ve ever felt like your workday was consumed by communication about deals, you’re not alone. The study found that for 66% of M&A respondents, communication accounts for one-fifth to half of their working hours. For an additional 34%, it exceeds half their time, with some dedicating up to 90% of their day just to communicating!
Even more shocking: 84% of respondents estimate that they lose 30 hours or more during the 9-month life cycle of a typical transaction due to communication problems. For 18% of M&A professionals, the loss exceeds 150 hours. That translates to nearly 4 weeks of work – an entire month – lost to poor communication during M&A transactions!
Trust falls (and so can the deal)
Beyond the immediate operational impacts, communication failures erode something even more valuable than time or money: trust between parties in an M&A transaction. The study found that 36% of respondents cite a loss of trust as a consequence of poor communication.
In M&A, where confidentiality and precision are paramount, this is particularly damaging. When stakeholders can’t rely on consistent, clear communication about valuation models, integration plans, or regulatory requirements, they begin to question everything else about the transaction. Decision-making becomes more cautious, processes slow down, and the collaborative spirit essential for complex deals evaporates.
The wish list: What M&A professionals want
So, what would M&A professionals change if they could wave a magic wand? The study reveals their communication wish list:
- 70% want better traceability of messages and documents about deals
- 68% desire a centralised platform for easy access to due diligence information
- 48% prioritise real-time notifications about transaction status
- 42% need improved document sharing for contracts and financial models
- 46% call for stronger protection of confidential company and client data
Notice a pattern? These professionals aren’t asking for fancy features or cutting-edge technology. They’re asking for basics: Knowing where all information about deals is, who has seen it, and ensuring it’s secure and transparent.
The solution: Centralise, standardise, prioritise
The good news is that solutions exist. Centralised due diligence platforms like Drooms are designed specifically to address these pain points, providing a single source of truth for M&A transactions. These platforms come packed with features such as Drooms Chat, which ensures that messages and threads about deals are traceable, updates occur in real time, and data sharing is both secure and efficient. They break down the silos that lead to miscommunication and improve transparency by making relevant deal information accessible to everyone involved in the transaction.
The bottom line for M&A dealmakers
In complex merger transactions, communication isn’t just about exchanging information – it’s about creating a foundation for trust, collaboration, and, ultimately, successful closings. As investment banks and corporations continue to navigate increasingly complex deals with multiple stakeholders, investing in centralised dealmaking platforms isn’t just smart – it’s essential.
The next time you’re tempted to send a critical deal update via WhatsApp or bury crucial information about a target company in a lengthy email chain, remember: The success of your deal may depend on how well you communicate, not just what you communicate.
After all, in the high-stakes world of M&A transactions, the difference between “message sent” and “message received” could be worth millions in deal value or integration synergies.
If you’d like to find out more about how Drooms can help you improve your dealmaking communications, please click below or get in touch with us at contact@drooms.com.
About the research
Between October 4 and October 29, 2024, 50 real estate managers and 50 M&A managers were surveyed by Statista on behalf of Drooms via structured telephone surveys. The survey covered dimensions such as the time spent on communication in transaction processes, the communication tools used, and the cooperation between the parties involved in transaction processes. 48% of the real estate managers work in real estate companies, 42% in investment firms, 6% in corporate real estate and 4% in the public sector. Of the M&A managers, 30% work in private equity firms, 22% in M&A boutiques, 20% in corporate finance departments, 18% in investment banks, and 10% in consulting firms.
