In the high-stakes world of mergers and acquisitions, the image of a deal team running on fumes and caffeine is often worn as a badge of honour. The all-nighters, the weekend-long due diligence sessions, the relentless pressure—it’s all part of the lore.
But beyond the bravado lies a critical and often underestimated risk: deal fatigue. This is not simply about being tired; it’s a profound cognitive and psychological erosion that can directly compromise deal quality, valuation, and long-term success. Recognizing it as a strategic liability, rather than a necessary evil, is the first step towards building more resilient and effective M&A functions.
Beyond Burnout: The Cognitive Erosion of a Deal Sprint
At its core, deal fatigue attacks the most crucial asset in any transaction: the team’s collective judgment. As exhaustion sets in during the intense sprint from LOI to closing, decision-making quality degrades in subtle but dangerous ways.
The brain, seeking shortcuts under stress, becomes highly susceptible to cognitive biases. What begins as a meticulous, objective analysis can devolve into a rush to the finish line, driven by emotion and mental shortcuts. The very faculties required for complex risk assessment—critical thinking, creativity, and dispassionate analysis—are the first casualties of a fatigued mind.
The Silent Killers: Confirmation Bias and Escalation of Commitment
Two specific biases flourish in the fertile ground of deal fatigue. The first is confirmation bias, where the team subconsciously starts looking for data that validates the deal’s initial thesis while ignoring or downplaying red flags. The data room starts to look less like a source of objective truth and more like a mirror reflecting the team’s desire for the deal to work.
Closely following is the escalation of commitment, or the “sunk cost fallacy.” After investing thousands of hours and millions in advisory fees, the psychological pressure to see the deal through becomes immense. The conversation shifts from “Should we do this deal?” to “How do we get this deal done?”, even when disconfirming evidence mounts.
The Human Cost: From Damaged Deals to Broken Teams
The ultimate price of deal fatigue is paid long after the deal closes. Overlooked risks in diligence can morph into catastrophic post-merger integration challenges. Inflated valuations, born from optimistic biases, lead to massive goodwill write-downs.
But the damage isn’t just financial. The human cost on the deal team itself is staggering, leading to high turnover of top talent, pervasive burnout, and a toxic culture of endurance over excellence. The best analysts and associates eventually leave for environments that don’t demand a constant sacrifice of their well-being for the sake of another closed deal.
Also read: What’s the Impact of ESG on M&A Deal Structuring and Funding
Building Resilience: Structural and Leadership-Led Solutions
Mitigating deal fatigue requires proactive leadership and structural safeguards, not just lip service to work-life balance. Leaders must model sustainable work habits and enforce mandated downtime, such as a “pencils down” rule after a certain hour or a protected weekend before the final push.
Structurally, firms can institutionalize dissent by appointing a rotating “devil’s advocate” to the deal team—someone whose sole job is to challenge assumptions and poke holes in the investment thesis.
Furthermore, breaking the deal process into distinct phases with formal go/no-go “kill switches” can combat the escalation of commitment, allowing teams to exit a flawed deal without losing face. These aren’t signs of weakness; they are features of a robust, professional M&A process that prizes judgment over mere stamina.
