Common M&A Misconception: "We'll get locked into a bad deal"

So here you are, several months into discussions with the first buyer that approached you, nearing a deal. Initial talks promised loads of cash up front and a gratuitous earnout. The whole thing has taken up nearly all of your time, it has put extraneous stress on you, your board of directors and your shareholders, but you can see the gold on the other side, nearly within reach. You just want to close the deal and enjoy the rewards of all your hard work.

 

However, as negotiations get deeper into details, you realize that the deal on the table isn’t nearly as good as originally presented. You’re now faced with a tough choice: take the deal despite its deficiencies, or walk away and go through the whole process again, hoping to quickly find a more appropriate buyer before you get burnt out. Being this deep into discussions and not wanting to upset the buyer or your shareholders, you begrudgingly concede to the terms and take the deal. After all, there was nothing you could have done differently at this point or before, right? Maybe not…

 

You only get locked into a bad deal if you choose to.  You are in control of the process — creating an auction environment — and it’s up to you and your shareholders to accept or reject a deal.  If the deal doesn’t fit, you simply walk away. Other buyers will present themselves. Keep in mind that a single-buyer M&A process will NEVER return an optimal outcome.

 

If you can’t find another partner that is willing to offer acceptable terms, there is another option than just settling for the best of the worst. With Corum, our clients have the option of taking a “Hiatus” and coming back on the market several months later – seeking a partner with a better fit after improving the company. This can be in the form of increased revenue, a better product, leadership reorganization, or anything else that shows you are serious about an exit. There are thousands of buyers in the world, and chances are that you’ve probably not heard of half of them, let alone approached them for an acquisition. Finding the right partner for your company is not a matter of “if”, but “when”. Don’t settle for the first offer presented – always consider all of your options and treat the M&A process for what it is: the most important transaction of your life.

 

Posted by , Senior Vice President on 30 May 2017
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