M&A investment thesis is a contract, and the assumptions register you need to keep it live

Most M&A value erosion doesn’t come from bad strategy. It comes from executing yesterday’s strategy while the underlying assumptions quietly break without early detection. The Investment Committee (IC) paper is the contract in which those assumptions sit; however, after signing most organisations file it. The discipline that can separate value realising deals from value leaking ones is treating that paper as a live operating contract, not merely a sign-off document.

Twelve months in, the assumptions break before the plan does

Every IC paper recommendation rests on a stack of assumptions about the business, the market, and the macro environment. At signing, this assumption set is defensible. By month four, some have started to drift. By month twelve, several have broken, and the integration plan is still running on the original blueprint.

Three forces typically erode value quietly:

1. Macro and market shifts: Interest rate movements, consumer demand pattern changes, regulatory regime adjustments and competitive responses that move faster than expected. Most IC papers acknowledge these risks abstractly but few of them name the specific market signal that would weaken or invalidate the deal thesis.
2. Synergy costs shift and cost to achieve runs higher than modelled: Synergy complexity is greater than expected (including tech and data DD outcomes versus reality), and timing slips by a month, then two. The synergy number stays in the board pack as a target while the path to it quietly diverges from the path that is presented.
3. Counterparty behaviour and people shifts: Talent retention runs below the model. Customer churn surfaces in pockets that diligence did not anticipate. A founder under earn-out makes decisions optimised for their exit rather than the long-term value the acquirer underwrote.

Individually, each of these are manageable. Together, left unchecked, they are the mechanism by which deals erode quietly while the steerco still sees green.

Why the IC paper stops working

The IC paper captures the commercial logic of the deal at the moment of approval. After that, these factors can contribute to value erosion.

Assumptions are not equally tested. Some have been stress-tested through deep analysis and supporting diligence. Others are working assumptions, placeholders that made the model run, included to complete the financial picture, never properly validated. By the time they reach the IC paper, the rigour behind each one is invisible. A working assumption looks identical to a tested one on the page, and decision-makers cannot tell which is which.

Assumptions live in the model, not in the paper. Assumptions are buried in cell formulas, hidden tabs, and analyst memory. The IC paper presents the recommendation. The terms of that recommendation never surface as auditable items. By month six, the analyst has rotated to another deal, the model has been versioned beyond recovery, and even people who want to revalidate cannot find what to revalidate.

The steerco tracks milestone, not value delivery. Hitting 87% of milestones on time is a reportable green. Whether the assumptions that justified those milestones are still holding, or whether milestones are actually connected to value, are questions that do not appear on the agenda or discussed in depth.

An IC Assumption Register

The artifact that goes a long way to mitigate these types of failures, through transparency, is a simple one-page register that sits alongside the activity and milestone tracker.

Critical Assumptions are populated at IC paper sign-off and locked. Five to seven entries are the threshold assumptions on which the deal thesis stands or falls.

Category positions each one against the same risk taxonomy used elsewhere in the deal. Status is reviewed on cadence, typically fortnightly during the high-velocity months.

Detectability is an important field that captures one question: if this assumption broke tomorrow, would we know in time to act? Synergy ramp slipping shows up in the monthly P&L. A competitor pricing move that invalidates a revenue assumption can land before any internal indicator moves. The first is a high-Detectability risk; the second is low.

Evidence base requires a hard, observable signal, like deviation on the mutually agreed Business plan, monthly P&L vs Business plan, founder NPS, customer churn cohort and regulatory milestone tracking. Soft behavioural signals can supplement. Metrics that serve as lead indicators, which are being monitored should be included.

Decision owner should name two individuals and needs to be the individuals who own the response when status moves. Never the PMO.

When status moves from holding to drifting or broken, the assumption transfers into the formal Risk Register, where it picks up a named control and the full discipline of the risk operating system. The Assumption Register is the early warning layer covering ~80% of the deal value; the Risk Register is where formal control kicks in.

Factors to consider keeping the contract live

• Strategic fit: Does each major workstream still serve the assumption it was built around? If the assumption has shifted, the workstream needs to shift with it, deprioritised or become redundant.

• Market reality: Do the assumptions in the Register still hold? The Detectability column tells the team where to look first; the high-detectability assumptions get continuous monitoring, the low-detectability ones get a scheduled deep dive at every gate.
• Risk appetite: Is the implementation path still acceptable given where risk now sits? As the risk profiles evolve, the execution plan is allowed to evolve with them.

If the answer to any of the three is uncertain or no, the team should escalate for a design reset rather than pushing through. That moment of escalation is the most consequential moment in the post-deal lifecycle. Most teams avoid it because it feels like admitting failure. It is however reality and the discipline is the willingness to act on it.

The warning signs you shouldn’t ignore

On a recent vendor-side mandate we led, a carve-out separating a business unit into a strategic buyer’s operating environment, the vendor’s preparation was disciplined. However, it appeared to us that the buyer arrived at announcement without a settled target operating model or a synergy assessment robust enough to support practical extraction and prioritisation. Within six months, the synergy thesis was visibly drifting and urgency on capture was lacking. The buyer’s assumption register, had it existed, would have surfaced the problem before the announcement.

A separate pattern emerged on a listed acquirer’s integration of a founder led, high growth target under an earn out structure. The integration plan had to balance retaining the growth trajectory with integrating core functions (financial controls, people, corporate processes) without suffocating the acquired business. It also had to keep the founders focused on long term value creation rather than solely earn-out maximisation. The Assumption Register surfaced the dual mandate explicitly: which assumptions held only if the founders behaved a certain way, and what the early warning signal was if they did not. The signal was the deviation from the mutually agreed business plan. By the time it appeared, the team already knew which decision owner was on the hook and what the response path was.

Simple actions to protect your deal thesis

The Assumption Register is the most thesis critical layer and the simplest safeguard of a broader risk operating system across the deal lifecycle. These actions can protect your deal thesis.

• Audit your last completed IC paper.

• List its top five critical assumptions and name the metric attached to each one.
• Identify what each metric reads today, and whether the assumption it tests is still holding. Most deals have an assumption that, if it broke would unravel the thesis. Do you know which one that is? When did you last test it?

We are keen to exchange perspectives with fellow practitioners on what they are seeing in practice and what advantage really looks like in today’s M&A environment.