I have always been a fan of considering mergers & acquisitions as a viable way to more quickly scale your business. But, this road is not foolproof by any means. Below are some of things that can go materially wrong with M&A, so do your research and plan accordingly to avoid these known pitfalls.

1. WRONG POST-SALE TEAM

The skillset it takes to grow a small stand-alone business are very different from the skillset required to grow a larger business through M&A activity. You want to make sure someone inside “Newco” has past experience in dealing with M&A related issues like merging businesses, teams, financials, etc. and someone that knows how to operate a much bigger company, typically with more procedures and controls for scalability. Remember, the CEO’s role must change as the company scales.

2. MERGING TEAMS & CULTURES

Let’s face it, mergers are very much like marriages. You are merging people, personalities and cultures. And, marriages don’t always go as planned, often ending in divorce. But, “divorce” in the M&A sense is typically much harder to accomplish, meaning you are stuck with these issues, whether you like it or not. So, it is critical you do your homework and make sure the senior management has clear roles and can gel as a new team together. And, that the employees in the trenches will aspire towards a shared collaborative culture of “we”, instead of “us” vs. “them”.

3. BIG COMPANY LETDOWN

Oftentimes, entrepreneurs think selling to, and working for, a big company will solve all their problems, as big companies have bigger budgets, etc. But, having lived through two sales to billion dollar companies, big companies bring as many headaches, as they do solutions. Big companies move like a turtle, compared to the lightspeed of startups, with many layers of bureaucracy and decision makers. And, the powers that be at the top, are typically focused on much bigger “fish to fry”. Which means your startup will most likely get “lost” inside a big company, unless you have a well-documented agreement detailing their guaranteed support ahead of time.