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Why Financials Aren’t Enough: Trust Drives 70–90% of Deals to Collapse Thumbnail

Why Financials Aren’t Enough: Trust Drives 70–90% of Deals to Collapse

Industry research consistently reveals a harsh truth: 70–90% of M&A deals fail to meet expectations. With figures like that, focusing purely on EBITDA multiples or growth curves won’t save your exit.

The Trust Factor: A Key Predictor of Deal Success

A study of Israeli high-tech startups found that trust from acquired‑firm managers strongly correlates with successful post‑deal performance. Another mixed-method analysis emphasizes that openness and transparency during due diligence and negotiations are essential.

Buyers who feel misled rarely proceed.

The Human Tension in Numbers-Focused Deals

Numbers open the door, but character closes the deal. Move goalposts, hide skeletons, or play hard to get, and even savvy investors will walk. One buyer confided:

“I loved the business. But I couldn’t trust the founder. So we walked.”

It’s not fear of valuation; it’s fear of how you’ll show up under pressure.

How Mistrust Kills Deals

  1. Transparency breakdowns during due diligence spike buyer skepticism.
  2. Cultural distrust, including a lack of openness, impeded integration success across hundreds of M&A case surveys.
  3. Hidden red flags often surface late, derailing trust and damaging valuations.

The Real Cost of Trust Gaps

  • Lost Deals: The Majority of M&A negotiations stall or unravel because of trust issues, not just valuations.
  • Founder Retention Drops: Over 50% of founders leave before the two‑year post‑acquisition mark, often due to misaligned expectations and trust breakdowns.

What Founders Can Do: Transparency First

  • Be proactive with skeletons. Surface them early before buyers discover them.
  • Show consistent communication. Return calls, answer questions fully, on time.
  • Avoid shifting goalposts. Keep your stated expectations consistent throughout.

Final Thoughts

At Pinnacle Wealth Advisory, we’ve seen founders lose eight-figure exits not because of weak P&Ls, but because their founder behavior caused smart money to pull out.

Strong numbers open the door. Trust builds the bridge to close.

Ask yourself: Are you protecting value… or scaring off the buyers who would actually pay for it?