July was a good month. Two of my clients sold their software companies. In fact they closed within three days of each other, one on Friday and the other on Monday. What struck me was not the coincidence that deals completed so close together or even how differently the process unfolded for each seller. It was how long it took to complete the transaction once we had reached agreement on the term sheet. In both cases, completing each deal took several months longer that we expected. Why did it take so long to get a deal done? The strategic alignment was strong. The parties were highly motivated. The sellers received a fair price for their company and neither buyer overpaid. Both buyers had M&A experience and executed professionally. The sellers were well organized for due diligence and everyone engaged experienced legal counsel.

Actually, the primary reason was that both buyers had many moving parts to contend with internally that needed to align in a specific sequence to get their deal done, and that alignment took time. In one case, the buyer was seeking additional funding for the deal, completing the divesture of a product line and contemplating a second acquisition - all at the same time. In the other transaction, the buyer had recently completed other acquisitions, was transitioning at the executive level and fine tuning its product strategy which drove a redesign of our earn-out. We simply needed to get in line behind these other related initiatives. I am certain that the backdrop of the economic downturn created a climate of caution and slowed progress. No doubt, it didnt accelerate the process.

The take away Completing a software M&A deal with a committed buyer can still feel like a moving target. Deals, however straightforward they appear, are sometimes more complicated for the buyer than the seller realizes. They need time and patience as well as discipline. Progress often depends upon the completion of a number of prerequisites before the deal can close and those complexities may not be readily apparent to the other party.