Taylor J. Gustafson

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While the headlines focus on the billion-dollar disasters, smart mid-sized companies can, and should, learn from these failures. With careful legal, financial and operational planning, most of the risks that derail mergers can be anticipated and avoided.”

According to multiple studies, 70% to 90% of mergers and acquisitions either fail outright or underperform relative to expectations. Surprisingly, there have been a growing number of high-profile mega-mergers that are unraveling due to several factors, including post-closing chaos, cultural mismatches and scrutiny from U.S. regulators — particularly the Department of Justice and the Federal Trade Commission, which have intensified their crackdowns on deals that could threaten market competition.

From T-Mobile and Sprint to Warner Bros. and Discovery, even massive companies such as these well-known brands can get it wrong.

That begs the question, how do smaller or mid-market businesses do it differently when planning a merger or sale? How can they avoid the pitfalls of the mega-mergers gone wrong? Let’s look at some examples:

JetBlue-Spirit Airlines (deal blocked)

The attempted merger between JetBlue and Spirit Airlines unraveled after a federal judge sided with the Department of Justice’s lawsuit, blocking the deal on antitrust grounds. The court found that the merger, though not creating a monopoly, would greatly reduce competition and likely lead to higher fares for consumers.

This case proved that antitrust scrutiny is aggressive, even for non-monopoly players and smaller companies. Always prepare a more aggressive, consumer-first approach.

T-Mobile–Sprint (Merged 2020, complicated aftermath)

The 2020 merger between T-Mobile and Sprint was approved but required complex divestitures (the sale of subsidiary business interests), including Sprint’s pre-paid business to Dish Network to preserve competition.

While the deal technically closed, its aftermath continues to unfold, with Dish struggling to build a competitive network and T-Mobile facing challenges integrating Sprint’s customer base. This is a great example that even a “successful” merger can carry long-term complications and that fallout from post-merger execution can linger for years, making integration planning and accountability just as critical as deal approval.

Warner Bros.–Discovery (merged 2022, struggling post-merger)

The 2022 merger of media powerhouses Warner Bros. and Discovery was positioned as a win-win, but the post-merger reality has been turbulent. Massive debt, billions in losses, clashing cultures and controversial content cancellations have shaken confidence in the combined company.

Analysts have even speculated about potential asset sales or restructuring. The takeaway here is that cultural fit and clear strategy matter just as much as financials, maybe even more. Without them, integration turns chaotic, stakeholder confidence erodes and the initial promise of synergy quickly fades.

Even when billions are on the line, basic fundamentals of mergers and acquisitions are sometimes overlooked. These are the must-do items when contemplating a merger or sale:

Get ahead of regulatory scrutiny

Antitrust scrutiny is no longer just for Fortune 500s. If there is a risk of reducing consumer choice, raising prices or stifling innovation, especially in industries like tech, health care and transportation, the DOJ and FTC will be knocking at your door. Be sure your legal team assesses concentration risks and proactively prepares filings, disclosures, and analysis.

Nail cultural and operational fit early

Cultural misalignment kills more deals than bad numbers. Research consistently shows cultural misalignment is a leading factor in roughly half of failed mergers. It’s important to conduct true integration planning during due diligence. This includes clear leadership structure, consistent internal messaging, realistic timelines, strategies for retaining talent and minimizing service disruption.

Don’t overestimate synergies

“Love is blind” isn’t just a personal saying; it applies to professional partnerships as well. Inflated synergy projections make closings look more attractive than they are in reality. To avoid this, use neutral third-party advisors to challenge rosy assumptions.

While the headlines focus on the billion-dollar disasters, smart mid-sized companies can, and should, learn from these failures. With careful legal, financial and operational planning, most of the risks that derail mergers can be anticipated and avoided.

Editor’s note: Taylor J. Gustafson is an attorney and shareholder at Phoenix-based May, Potenza, Baran & Gillespie, specializing in mergers, acquisitions and corporate law. Please submit comments at yourvalley.net/letters or email them to AzOpinions@iniusa.org. We are committed to publishing a wide variety of reader opinions, as long as they meet our Civility Guidelines.