Fresh Eyes

And yet another reason why most acquisitions fail

Missed TargetCrazy hours, even pulling all-nighters, is a grand tradition in acquisitions. There’s great bravado in sending out emails at two or three in the morning. Internal staff and investment bankers alike boast of their seventy, eighty or ninety hour weeks during crunch time.

Leaders have consciously or unconsciously rewarded this apparent commitment to the cause — often recalling the all-nighters they pulled earlier in their careers as they climbed the ladder.

But that’s now changing among forward-thinking leaders who realize this dedication actually contributes to the abysmal failure rate of acquisitions (recall it’s now widely acknowledged that 70-80% of acquisitions fail to bring value to the buyer).

DUI – Deals Under The Influence

To put it bluntly, the longer we work, the dumber we get.

By the time someone has put in 21 hours, their mental abilities have degraded to the equivalent of having a 0.08 blood alcohol level. And this doesn’t have to be an all-nighter – simply shorting sleep to six hours per night over the course of two weeks leaves us with the cognitive equivalent of a 0.10 blood alcohol level.

Ask yourself, would you accept the advice of a legally drunk business team? Since this isn’t an episode of Mad Men, I wouldn’t think so.

But an even more important cognitive function begins to fail much sooner…

A Shortage of Doubt – An Abundance of Risk

Researchers have now found that doubt – critical evaluation of an idea – requires an enormous amount of mental and emotional energy. To conserve energy, our minds cease to engage healthy skepticism when we tire. Going further, we now know that fatigue actually elevates risk-taking.

No wonder teamS have so much confidence that this acquisition will beat the odds. The part of their brains capable of doubt shut down hours ago. No wonder these very confident teams are so often wrong in their “Go” recommendations.

Tapping Fresh Eyes

CEOs and boards are beginning to act on these revelations. While M&A teams still need to pull all-nighters, the folks putting in excessive hours do not provide the final analysis and recommendations.

Instead, CEOs designate a small team held in reserve. These folks stay current with progress but are not putting in crazy hours. Instead, they stay fresh and take over the work of the final analysis as the project nears its end.

Using this tactic, CEOs and boards are getting their “go or no-go” and price recommendations from professionals operating at their peak capability, not by folks hobbled by fatigue.

© Dave Wittenberg