To understand how this happens, it helps to look carefully at the mechanics of the standard M&A playbook, the incentives it creates, and what those incentives do to the people involved.
The Flawed Mechanics of the Standard M&A Playbook
When a company is put up for sale, sell-side M&A advisors are usually appointed to manage the transaction. While they do not decide who ultimately becomes the new owner, they design the sale process, manage the narrative, and control the interactions with potential buyers. Because their compensation is almost always directly aligned with deal completion at the maximum possible price, that singular alignment shapes everything.
The standard M&A playbook generally follows a typical sequence. First is the preparation of the "equity story," a highly curated narrative emphasizing financial performance and strategic potential, tailored to attract the widest possible pool of buyers. Next, a competitive auction is organized. This is a structured process in which interested buyers submit bids within artificially compressed timelines designed to create urgency and drive up the price. Finally, the bids are evaluated, and the highest number inevitably dominates the assessment.
Most sellers, particularly founders, enter this process with legitimate concerns about employee welfare, mission continuity, and their business legacy. They know that protecting these things requires weighing qualitative factors like long-term strategic alignment and cultural compatibility. But as the auction gains momentum, the allure of a higher valuation gradually overshadows these concerns. What begins with broader aspirations narrows, step by step, until the transaction is framed almost entirely in financial terms.
The First Casualty: Operational Truth
Every successful company runs on far more than what appears in the data rooms and management presentations. The mix of shared purpose, proven practices, relational dynamics, and decision-making habits within an organization is what actually turns strategy into results. These intangibles are the real engines of competitive advantage and cash flow generation.
However, they are also the hardest things to document, and the standard M&A process is not designed to surface them. Because the narrative is built to appeal to the broadest possible audience and increase the likelihood to complete the deal, it actively simplifies the company's complexity. It has to. Complexity creates friction and slows down auctions.
The profound irony is that to maximize the financial perception of the company, the process erases the very elements responsible for its long-term value creation. As a result, buyers form their understanding of the company through a lens that is financially detailed but operationally shallow. They acquire an organization they only partially understand.
The Second Casualty: Rational Expectations
That partial understanding would be a problem on its own, but the auction dynamic creates a second, compounding issue.
One of the main reasons to buy a company is to capture synergies. These are the cost savings, revenue uplifts, and operational efficiencies the buyer expects to achieve after the acquisition. As a part of the M&A process, potential buyers have to make assumptions about these future gains.
Every rational buyer wants to pay as little as possible for an acquisition. But the auction process forces them to pay as much as possible to win. To resolve this tension, buyers use their synergy assumptions as an analytical bridge to justify a bid they would not otherwise make.
The higher the competitive pressure in the auction, the more these assumptions must be stretched to support the winning bid. At the same time, the buyer lacks the operational depth to stress-test their own projections because the process never afforded them that depth.
The auction, in other words, does not just select a buyer. It produces a buyer who has likely overpaid relative to what the business can realistically deliver, and whose expectations have been wildly inflated to justify that overpayment. This inflation is the natural product of a process that rewards the highest number while providing only a superficial view of how the company actually works.
The Post-Close Death Spiral
After the deal closes, the expected synergies inevitably fail to materialize as modeled. The new owner faces a widening gap between what was envisioned and what the business is actually delivering. Having paid a price calibrated to flawless assumptions, and having made commitments to their own board or investors based on those assumptions, the pressure to close that gap becomes intense.
Cost reduction is often the first tactic used. But because the buyer suffers from the cultural blindness created during the sale process, they cannot reliably distinguish between what is essential and what is expendable. Cuts that look like simple efficiency improvements on a spreadsheet often eliminate the very capabilities, people, or informal processes that made the business perform in the first place.
Key employees whose institutional knowledge held teams together leave or are made redundant. Decision-making patterns that took years to develop are overwritten by standardized procedures imported from the buyer's existing operations. Performance degrades as a direct consequence of these cuts, which paradoxically appears to validate the buyer's need for further intervention. More restructuring follows.
What began as a gap between expectations and reality becomes genuine operational decline, resulting in lasting and often irreversible damage to the business.
The Scale of the Damage
Widely cited research on M&A outcomes, drawing on studies from major consultancies and academic institutions like the Harvard Business Review, places the rate of acquisitions that fail to deliver their expected value at between 70 and 90 percent.
That statistic is often presented as proof that M&A is inherently destructive. The reality is more precise: it measures how frequently the standard process produces the fatal combination of cultural blindness and overpayment. The 70 to 90 percent figure is not a measure of how many companies are doomed on day one. It is a measure of how reliably the standard M&A playbook puts companies in danger, creating operational conditions that many of them ultimately do not survive.
A Different Process for a Different Outcome
Neither cultural blindness nor overpayment are inevitable. Both arise directly from how the sale process is designed. Sellers can choose a different path.
Different objectives lead to different process designs, which dictate the behaviors of every participant. A process designed to sell to the highest bidder produces fundamentally different dynamics than a process with a responsible approach and designed to identify the buyer most likely to ensure a successful future for the company.
When the objective shifts from maximum price to long-term stewardship, the process changes in fundamental ways. Cultural due diligence, conducted through anonymous employee surveys, leadership interviews, and behavioral assessments, makes the company's intangible drivers visible and easier to protect. Buyers are given a genuine understanding of how the company actually works, not just what it earns.
The benefits of this transparency extend beyond protecting culture. A buyer who understands what actually drives performance is less likely to inflate synergy assumptions to justify their bid, less likely to overpay as a result, and far less likely to reach for destructive cost-cutting when integrating the business.
Breaking the cycle requires rejecting the false appeal of price as the sole arbiter of a successful exit. By embracing an M&A process that deliberately highlights and safeguards intangible value, sellers can elevate the transaction from a mere extraction of value into a true succession: one that empowers the team, continues the mission for the benefit of consumers, and decisively safeguards the business legacy.
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Amine Laouedj Managing Director, Glenshore
I advise responsible business leaders who wish to ensure their company ends up in the right hands and continues to flourish after their exit. If these perspectives resonate with your thoughts, I welcome a conversation. Please connect or message me on LinkedIn.
Glenshore is a boutique investment bank with the Succession M&A Playbook, a disciplined approach to align financial outcomes with long-term mission and legacy preservation. Learn more at glenshore.com.
Disclaimer: The analysis contained herein reflects publicly available information as of the date of publication, sourced from official filings, academic literature, and verified secondary sources without the use of proprietary or non-public data. The views expressed are those of Glenshore and are provided solely for informational and educational purposes; they do not constitute investment or financial advice, nor a recommendation to take any particular action. This material may contain forward-looking statements, and past performance is not indicative of future results. Glenshore makes no representations or warranties regarding the accuracy or completeness of this information and disclaims any liability for reliance upon it for any purpose. Any third-party organization mentioned is the property of its respective company and is used strictly for identification purposes. This material may not be copied, distributed, published, or reproduced in whole or in part without the express written consent of Glenshore.