What is a common mistake made in projections for mergers and acquisitions?

A common mistake made in projections for mergers and acquisitions is often related to the assumption of no economic recessions. This approach can lead to overly optimistic financial forecasts because it does not account for the cyclical nature of economies. M&A projections should realistically consider the possibility of economic downturns, as these can significantly impact revenue, profitability, and overall business viability post-merger.

By ignoring potential recessions, companies may fail to prepare adequate contingency plans, resulting in vulnerabilities if market conditions change unexpectedly. It's crucial for financial models in M&A to incorporate a range of scenarios, including adverse economic conditions, to provide a balanced view of potential risks and rewards associated with the transaction.

In contrast, while underestimated market competition and overestimating growth rates are also significant considerations in financial projections, they represent different aspects of the strategic evaluation process, focusing more on the competitive landscape and operational feasibility rather than the economic cycle itself.