Whether buying, selling or merging companies, negotiating a Merger & Acquisitions deal is detailed and involved. That makes it all too easy to be swept up in “deal fever,” where dreams and projections of future success cloud the judgment of those involved, leading to bad decisions.
Below are three of the most common M&A misconceptions and how to avoid them.
1. That A Detailed Post-Deal Vision Can Wait Until Later
The problem: During a deal, potential sellers are often concerned about what their role will be after the dotted line is signed; buyers fail to properly anticipate how the new company will fit within their existing portfolio; and merging companies may fail to correctly understand each other’s market.
The solution: Having a nuanced and well thought out post-deal plan helps keep momentum, make the necessary changes and properly integrate the two companies.
2. Assuming All Parties Know What’s Confidential
The problem: During any major M&A deal a lot of paperwork changes hands. That makes it easy for documents to be “misplaced” or shared with those who don’t really need access to them.
The solution: Make sure every employee who will be involved in any part of the merger or acquisition signs a non-disclosure agreement (NDA). Additionally, limit who has access to important documents by using a secure virtual data room with permission-based user roles. Taking such actions will keep everything on an as-need-to-know basis, which will ensure that important information is kept out of the press — and the competition’s hands.
3. We Can’t Say No
The problem: No is a powerful word — and it is essential to remember that, especially when there are large amounts of profit up for grabs. It’s all too easy for those involved in negotiating a deal to become too close, leading them to focus on details that agree with their preconceptions and ignore those that don’t.
The solution: Everyone involved in the deal should make sure to evaluate all of their options and to involve objective parties in the review process. After all, everyone’s goal should be to do what is best for the long-term bottom line.