When deals disappoint, integration usually gets the blame. Bain & Company's research on due diligence points somewhere earlier in the process.
What Bain found
- In a survey of senior executives, almost 60% attributed deal failure to poor due diligence that did not identify critical issues.
- A 2019 follow-up survey found the pattern held for scope deals, those bought for new capabilities or markets. The failure of diligence to flag problems with asset quality was the No. 1 reason capability deals did not succeed.
- Bain concludes that poor diligence, not integration, is the most common root cause of deal failure.
Why this still matters
The survey is several years old, but the structure it describes has not changed. Most diligence still starts from documents the seller chooses to share. Issues that sit outside those documents, in public records, registries or the wider market, are the ones most likely to be missed.
Diligence fails most often on what nobody looked for. Starting from the external record, instead of only the data room, puts those issues on the table while there is still time to act on them.
Source
Bain & Company, Global M&A Report 2020, "Due Diligence". This post summarizes the source in our own words; figures are as reported there. Read the original for full methodology.