I met with a team of our dealmakers a few weeks ago to discuss a number of topics, one of them being the most common “deal killers” they had seen. These are generally situations or challenges that dealmakers like to anticipate and avoid at all costs. However, even despite their best efforts, stuff still happens.
Since some of our readers are business owners who will eventually be trying to close a deal for their companies without the aid of M&A professionals, I thought I would pass on these common problems to avoid so you can successfully complete your transaction.
The most common deal killers include:
There are probably a few dozen more that we could add to this list that happen far too frequently. However, this is a good place to start. By themselves, each of these items can be overcome, and a deal will still close. What will change, though, is that the valuation and/or structure of the transaction will be revised.
In other words, if these types of events occur (and it is rare for things to go perfectly in any transaction), the buyer will either change his/her offer due to increased risk, or the deal structure may be revised so that the seller assumes more of the liability if financial forecasts are not reached. This can take many forms, the most common being an earn-out, where future payments to the seller are contingent upon revenue/earnings targets being met.
Since many transactions are closed via bank loans, if these events occur, usually the party most concerned is the lending institution. Quite often they are the hardest part of the buyer’s team to placate when the unexpected arises.
Remember, you are only human and cannot anticipate every possible scenario that could befall your deal. However, the ones you can control, the ones that truly impact your ability to sell, are those items that you need to disclose as part of due diligence.
For example, if you are going to miss your base year revenue by 10%, tell the buyer that as early as you can and explain why. Withholding that until a later date can have a severe negative effect on a transaction.
If you know of any pending litigation, likewise disclose that early in the process so its magnitude (or lack thereof) can be factored into the valuation metrics by your buyer. Same with environmental, OSHA, insurance-related information, etc. 'Tis far better to over-disclose than under-disclose.
Again, this is just a short sampling of deal killers that you should avoid. To learn about others and more importantly discuss how you can prevent them, you should attend a Generational Group executive exit planning conference. These are complimentary and highly educational, designed to get you up to speed quickly on how you can close a deal for your company at a maximum value – by avoiding these common pitfalls along the way.
Here are some links to give you more information about us and our exit planning services for executives:
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2017 Generational Equity, LLC. All Rights Reserved.
The information we learn from customers helps us personalize and continually improve your experience at gencm.com. Here are the types of information we gather.
Information You Give Us: We receive and store any information you enter on our Web site or give us in any other way. We do not sell or rent your personal information to others without your consent. We use the information we collect only for the purposes sending promotional information, enhancing the operation of our site, serving advertisements, for statistical purposes and to administer our systems. We DO NOT use third parties to provide customer service, to serve site content, to serve the advertisements you see on our site, to conduct surveys, to help administer promotional emails, or to administer drawings or contests, but reserve the right to do so in the future without advance notice. Our computer system protects personal information using advanced firewall technology.
Information from Other Sources: For reasons such as improving personalization of our service, we might receive information about you from other sources and add it to our account information.
Generational Capital Markets LLC may license the use of its intellectual property including but not limited to its name, likeness, and logo for the use of affiliated offices. Such affiliated offices may not be owned, controlled, managed, supervised or staffed by employees, officers, or agents of Generational Capital Markets, L.L.C. Affiliated offices may be independently owned and operated. For more information about a particular office, please contact Generational Capital Markets LLC at is office in Dallas, Texas.
This page may contain other proprietary notices and copyright information, the terms of which must be observed and followed.
INFORMATION ON THIS WEB SITE IS PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT. SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION OF IMPLIED WARRANTIES, SO THE ABOVE EXCLUSION MAY NOT APPLY TO YOU.
Information on this web site may contain technical inaccuracies or typographical errors. Information may be changed or updated without notice. Generational Capital Markets may also make improvements and/or changes in the products and/or the programs described in this information at any time without notice.
Generational Capital Markets does not want to receive confidential or proprietary information from you through our web site. Please note that any information or material sent to Generational Capital Markets will be deemed NOT to be confidential. By sending Generational Capital Markets any information or material, you grant Generational Capital Markets an unrestricted, irrevocable license to use, reproduce, display, perform, modify, transmit and distribute those materials or information, and you also agree that Generational Capital Markets is free to use any ideas, concepts, know-how or techniques that you send us for any purpose.
Information Generational Capital Markets publishes on the World Wide Web may contain references or cross references to other products, programs and services that are not announced or available in your country. Such references do not imply that Generational Capital Markets intends to announce such products, programs or services in your country. Consult a Generational Capital Markets representative for information regarding the products, programs and services which may be available to you.
Generational Capital Markets makes no representations whatsoever about any other web site which you may access through this one. When you access a non-Generational Capital Markets web site, please understand that it is independent from Generational Capital Markets, and that Generational Capital Markets has no control over the content on that web site. In addition, a link to a non-Generational Capital Markets web site does not mean that Generational Capital Markets endorses or accepts any responsibility for the content, or the use, of such web site. It is up to you to take precautions to ensure that whatever you select for your use is free of such items as viruses, worms, trojan horses and other items of a destructive nature.
IN NO EVENT WILL Generational Capital Markets BE LIABLE TO ANY PARTY OR ANY DIRECT, INDIRECT, SPECIAL OR OTHER CONSEQUENTIAL DAMAGES FOR ANY USE OF THIS WEBSITE, OR ON ANY OTHER HYPERLINKED WEBSITE, INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS, BUSINESS INTERRUPTION, LOSS OF PROGRAMS OR OTHER DATA ON YOUR INFORMATION HANDLING SYSTEM OR OTHERWISE, EVEN IF WE ARE EXPRESSLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Furthermore, all information contained within this website is the property of Generational Capital Markets.
Honored to win Investment Banking Firm of the Year 2 years running.
Over 50 awards and counting.
Sign up to receive regular email updates, industry-leading insights and details on complimentary M&A executive conferences in your area from our award-winning team
Success, you have been added to our list.