Not surprisingly, in cases where the percentage of deal value and the absolute value of announced synergies were low, the average closing time was lower than the overall average. But as the relative and absolute synergy values increased—whether for each metric individually or in combination—the closing times rose to significantly higher numbers than the overall average. (See Exhibit 4.)

Several factors explain the relationship between synergies and closing timelines. Larger deals often have larger amounts of expected synergy, and such deals naturally take longer to close owing to their complexity and scale. In addition, higher absolute levels of synergy attract greater regulatory scrutiny, as authorities examine the sources of these advantages to test for compliance and feasibility. Feasibility inquiries may include evaluating whether the merger’s perceived benefits are likely to outweigh the regulators’ concerns. This more thorough examination creates the potential for delays, making close timelines uncertain.

Addressing the Uncertain and Prolonged Timelines

The delayed closing timelines that our study confirms introduce several risks that affect integration planning and execution. Chief among these are the slower pace and smaller magnitude of synergy capture, resulting from planning constraints, changes in deal parameters, or developments in markets over a longer time frame. Other common risks include higher costs for legal counsel and integration planning, inefficient resource use, and damage to employee morale during prolonged periods of uncertainty.

Although the challenges are complex, dealmakers can navigate them effectively through early and thoughtful planning—both before signing the deal and during integration planning.

Presigning Phase. Dealmakers should develop strong internal processes and a clear M&A strategy through four critical activities:

• View deals through a regulatory lens. As they identify opportunities, dealmakers should aim to gain an early understanding of which deals may face regulatory or geopolitical obstacles. This is particularly important for the largest deals (those with a value of $10 billion or more). However, other deals could also face scrutiny from regulators in the current environment.
• Build a diverse pipeline. Companies can create options by building a deal pipeline that encompasses transactions across a range of likelihoods for regulatory scrutiny, avoiding overreliance on any single type of deal.
• Specify options when challenges arise. Deal participants should identify and detail possible remedies, and clearly define go or no-go scenarios for abandoning deals. For example, they might consider selling parts of the business that are likely to generate high regulatory scrutiny.
• Plan for a more conservative financial model. When modeling a deal, dealmakers should account for slower realization of synergies due to planning constraints and higher costs related to legal fees, integration planning, and other aspects of the deal that heightened scrutiny may affect.

Integration Planning. Companies should “go slow to go fast,” emphasizing meticulous planning to prepare for rapid and successful integration:

• Set clear priorities early. Dealmakers need to articulate clear integration priorities, coordinating the activities of the buyer’s and seller’s teams. They should launch integration teams in a strategic sequence to maximize value while avoiding excessive costs and preventing deal fatigue among participants as the work progresses. For example, they can prioritize teams that focus on technology integration planning and realizing quick wins on synergies. It is wise to approach the integration as a marathon, not a sprint.
• Take a conservative financial stance. To avoid overreliance on early synergies, companies should adopt a more conservative public financial stance than businesses typically observe in deal announcements. They should strive to ensure that internal targets, while aggressive, allow for the possibility that the business environment may evolve in ways that could reduce synergy opportunities, particularly for revenue.
• Communicate frequently with employees to maintain morale. Companies should keep employees who are involved in the integration informed about priority topics and the program’s evolution. They should explain any planned work stoppages that are necessary to comply with regulatory requirements or to facilitate regulatory reviews and approvals. They should also regularly remind all employees of the deal’s benefits, the future vision for the combined entity, and the importance of collaboration between the buyer and the seller.

Recent and proposed regulatory changes highlight that policymakers are significantly revising their approval standards and altering the playing field for future deals. We are seeing longer closing periods, greater uncertainty about approvals, and a need for additional remedies. Dealmakers will feel the impacts of these changes throughout the M&A life cycle and must respond accordingly, from rethinking how they build a deal pipeline to negotiating and planning execution. These challenges are likely to intensify as new guidelines come into effect. In this rapidly evolving environment, successful dealmakers will be more persuasive in pitching deals to target companies and more skillful in navigating the risks and complexities of heightened scrutiny.