Hear that distant gurgling sound? That’s the sound of your deal — and of all that prep, all those hopes, and all those stakes — spiraling down the drain. Chances are, the whole shebang fell victim to a common deal killer, but the good news is, this watery grave is just one potential timeline. And it’s not a timeline we have to live in.
Like Sun Tzu said, “Know thy enemy.” Know your deal killers up front, and you’ll be ready to face them before they do any damage at all. From the well-known to the totally left field, avoid stepping on these mines as you navigate your next deal, and the only thing you’ll be killing is the next pitch meeting.
Great Expectations
Deals die on pie-in-sky timelines and unrealistic sale price expectations. It’s OK to have confidence in your company or client, but remember that your deal isn’t anyone else’s deal, and comparison can be deadly. In terms of valuation, remember that it can be based on book value, discounted cash flows, market capitalization, or a slew of other metrics. Rather than creating a narrative and expecting it to happen exactly as it appears in your mind’s eye, expect to be flexible.
Straight-Up Bad Timing
Some deal killers prey on your mistakes, others can just be plain old bad luck; sometimes, it’s just not the right time to close the deal.
But you can still do your best to wrangle fate over to your side. Avoid selling at the end of a market cycle to attract more buyers, and resist the temptation to sell during M&A booms, as the buyer base may be stretched too thin. Exercise patience to make deal timing work for you, not against you.
No Team, No Dream
Here’s the thing: you can’t close an M&A deal by yourself, especially if you’re dealing with an experienced team of buyers or sellers, who specialize in negotiation. And if you do somehow pull off the miracle of succeeding solo, you won’t get the best deal. Hire a deal team to review your pitch, go over your mile-long list of due diligence questions, crunch the numbers and create a plan, and collaborate with that deal team every step of the way — our super-secure virtual workspaces can help with that.
Undue Diligence
We can’t believe we have to say this, but no matter what kind of deal you’re diving into, don’t do it head first. Due diligence can literally make or break a deal, from top to bottom. To save your deal from the depths of the toilet, your to-due list (see what we did there??) should include, at minimum:
- Accounting cleanup
- Customer contingent liabilities
- A full contract database
- Thorough governance documents
- Legal strategy
- A data room solution (we have one idea)
Neglecting Your Best Assets
Hey, you. Don’t be like big tech. Don’t do that massive layoffs thing. Nobody likes that. You know why they don’t like that? Because it’s not the right thing to do.
It’s all too common that the best-laid deals end in failure because a company doesn’t understand (or chooses to ignore) that employees make the company what it is. When mass firings go down or employees flee upon acquisition, the buyer might as well have just founded a startup instead. Rather than bringing down the axe to cut costs, offer deferred compensation plans, stay bonuses, and other legit incentives to keep the invaluable human element intact.
The Vibes Are In Shambles
OK, so that’s a little reductive (and, uh, TikTok-ish), but the truth is, the deal will die on the vine if buyer chemistry isn’t there. In fact, JDMerit considers lack of chemistry one of the top three most common deal killers.
But what does that even mean? Committing to chemistry means looking beyond the buyer who simply offers the highest price. It means taking into account what will happen to employees on board, ensuring synergy in company cultures, and considering the ultimate legacy of your company long after you’re gone. JD’s Craig Dickens advises: “There’s only one solution for poor chemistry, especially if you’re committing to being involved with the business for a significant period — walk away.”
Time Waits for No Deal
After company chemistry, let’s focus on something way more simple and tangible: slow response times. That’s it. Dragging your feet on responses can signal that you’re not serious, you’re not invested, you’re simply too important to be involved in the deal, you’re inexperienced, or even that your communication tech is out of date.
You do not want these things. Slothfulness is a deal killer. Moving on.
An (IP) House Divided
While it should be part of a thorough due diligence, the failure to get your company’s intellectual properties in order can be a quiet, oft-neglected deal killer. According to Foley & Lardner partner Todd Rumberger over at VentureBeat, if your company deals in IP, that “IP house” had better be spic and span.
That means getting all signed IP agreements, invention assignments, and confidentiality agreements from all parties — including founders, independent contractors, and everyone in-between — exactly where they need to be beforehand. Says Rumberger, the best case scenario is one in which “There is nothing to disclose to the acquirer about your company’s IP representations or, if there is something to disclose, a thoughtful explanation is provided.”
That Was A Big Mistake
Here’s a deal killer that doesn’t always happen in the room, though when it does it often pops up near the end of the process and leads to you taking a bum offer. It also moonlights as a soul crusher, and it’s called seller’s remorse.
Before you settle on selling, talk to yourself, your peers, your employees, your family, your friends, your therapist, your dog, your Magic 8 Ball, even. Know that it’s what you want beyond a shadow of a doubt before pulling the trigger. As John Brown of Axial says, “Find things that you want to do after you exit before you exit. Make sure that the business isn’t your life before selling.”
Preparation, Preparation, Preparation
An ounce of preparation is worth a pound of cure. Measure twice, cut once. Fail to prepare, prepare to fail. All of those platitudes about preparation have become cliches for good reason: preparation matters so very much, especially when it comes to dealmaking.
From tax issues to financial controls to legal vulnerabilities, your buttons must be buttoned, every single “i” must be dotted, and every question you can possibly expect to arise must have an answer prepared. Smooth, secure team communication via a safe virtual data room platform like CapLinked can be crucial to this end. Our flexible VDR facilitates preparation essentials like secure document sharing, legal compliance collaboration, extensive management of confidential docs, audit and activity tracking, and safe virtual co-workspaces for buyers and brokers, M&A management, due diligence projects, and more.
Start a free 14-day CapLinked trial today. It might just be your deal killer’s killer.
Dan is a freelance writer with over a decade of experience, currently residing in Dallas, TX. Along the way, he’s been lucky enough to collaborate with brands including Fortune, The Motley Fool, Office Depot, MSN Money and many more.
