Vijay Raghavan identifies what goes wrong with a merger that underperforms after the acquisition.
𝑻𝒆𝒄𝒉 𝑴&𝑨: 𝑾𝒉𝒚 “𝑮𝒓𝒆𝒂𝒕 𝑨𝒄𝒒𝒖𝒊𝒔𝒊𝒕𝒊𝒐𝒏𝒔” 𝑺𝒕𝒊𝒍𝒍 𝑼𝒏𝒅𝒆𝒓𝒑𝒆𝒓𝒇𝒐𝒓𝒎
When a large company, Acme, acquires a smaller firm, Widget, to enter a new product area, it often seems like a perfect match. Widget has a proven track record with approximately $20M in annual recurring revenue (ARR), a strong team, and a solid product. The market potential is significant, with a total addressable market (TAM) exceeding $2B. Acme’s projections suggest they can achieve over $100M in ARR by year three, leveraging their existing customer base.
However, 18 months later, the reality is starkly different:
– ARR remains flat, falling short of the expected ~$50M.
– Profitability shifts from healthy returns to deeply negative.
– The founder exits, and talent churn accelerates.
This leaves the acquirer questioning: What went wrong?
In my experience with post-merger integrations, the issues are rarely isolated. Instead, they often stem from a combination of factors, including:
– Misaligned incentives
– Operating cadence discrepancies
– Sales-motion mismatches
– Ambiguities in decision rights
– Governance of the product roadmap post-acquisition
For operators and investors, I pose this question: What is the most common failure mode you’ve encountered following a strategic acquisition?
I am also compiling a follow-up piece addressing repeatable patterns and practical solutions to prevent value leakage during the critical first 12 to 24 months.