Ego - the deal killer
We were divesting the software subsidiary of a large public company. The sale was being managed by a member of the Board of Directors of the parent, an attorney with a big ego who had negotiated several acquisitions but had not been on the sell side of any transactions. Unfortunately his corporate ego, lack of entrepreneurial experience and understanding of the nuances of sell side destroyed the deal.
The software company was growing well and had become the leader in its vertical market. It attracted a lot of attention and several good bids. The best proposal came from a private equity firm wanting to acquire the company as a platform for further acquisitions in an all-cash transaction at a very strong valuation. Unfortunately, the inability of the attorney to see the big picture and make even small concessions to get the deal done had a major impact. The attorney’s ego-driven antics created many unnecessary hurdles and severely tested the patience of the buyer. Consequently we spent far too much time in due diligence and negotiating the definitive agreement. The transaction fell apart one week from closing after the company, distracted by getting the deal done, missed its forecast. This became the buyer’s excuse to walk. In truth, the buyer/seller relationship was so broken that it could not be repaired. It took four more years and two more failed transactions before the company was eventually sold at a significantly discounted valuation.
Posted by JeffBrown, Vice President on 14 October 2011