The best M&A transactions result in both the buyer and the seller achieving significant benefits. However, completing an M&A transaction is often complex, challenging and, at times, frustrating. Many issues arise, ranging from minor and easily handled to major problems that can prevent a deal from closing. Recently, Grant Thornton LLP shared some insights into the types of issues that can become “Deal Killers”. When you decide to sell your business, it is vital that you are aware of these Deal Killers, because avoiding these problems is critical to a successful M&A transaction:
- Missing your numbers: Deals typically take 6 to 12 months to complete (sometimes longer), so buyers will compare your ongoing performance to the numbers presented in your documentation. Buyers will become very concerned if you miss the forecast that you created only months before.
- Surprises: Buyers do not like surprises. Buyers will ‘spook’ if they learn about significant issues for your business that were not properly disclosed in your documentation.
- Changing the deal: Sellers become infuriated when buyers change the deal after signing an LOI. In fact, some buyers are known to use this as a negotiating tactic. Conversely, buyers do not like to deal with sellers who ask for ‘more’ after agreeing to their LOI.
- Hiring inexperienced deal professionals: As Grant Thornton says, “Inexperienced deal professionals, whether lawyers or M&A advisors, are more likely to sour a deal than get a good outcome.”
- Forgetting about taxes: Too often sellers focus on getting their price. Unfortunately, these same sellers find out later in the process how much the government will require out of the transaction. A tax advisor with M&A experience should analyze the deal structure from a tax perspective early in the process.