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The Top 5 Mistakes That Derail M&A Negotiations


Seasoned professionals know that engaging in a merger and/or acquisition (M&A) requires a lot of hours, documentation, and the expertise of quite a few people. Of course, any M&A process generally begins well before an actual deal gets off of the ground. As a result, a good amount of money will likely have been invested by the time things kick off and thus everyone will be pretty eager to see things through to closing. It would be most unfortunate for a good deal to fall apart because of poor negotiation strategies or reliance on incorrect data. Here are five common mistakes that could derail the negotiation process:

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Inaccurate Information

Hopefully, all of the relevant information will have been gathered, analyzed, and distributed prior to the commencement of any serious negotiation rounds. However, in light of the sheer volume of data that will be required to complete any deal, it is within the realm of possibility that some of the information will be outdated or inaccurate. Consequently, it is incredibly important for all parties to maintain meticulous records before, during, and subsequent to the initiation of M&A negotiations. With the ease and ubiquity of cloud computing, there is really no reason that companies cannot keep items organized and up to date.

Poor Communication

Effective communication is the cornerstone of any successful business relationship, and during a high stakes, high stress situation such as an M&A transaction, communicating well is even more important than ever. In general, the number of people involved in the negotiations should be kept fairly limited to ensure a level of consistency and to prevent unnecessary confusion. In addition, matters must be addressed as they arise and nothing should be withheld or concealed for the sake of avoiding conflict. After all, with the right communication skills and approach, any conflict can be surmounted with ease.

Refusing to Concede on Small Points

A successful negotiation round obviously boils down to coming to an agreeable compromise. It is often said that with true compromise neither party is terribly pleased with the outcome nor terribly dismayed. In the end, the agreed upon terms must be fair and amenable to both sides. Unfortunately, refusal to concede on seemingly trivial matters is often the reason that negotiations are stalled or abandoned altogether. If parties are serious about getting to the closing table, they will be willing to bend on some of the smaller matters to strike a balanced accord.

Protracted Negotiations

In addition to small items stalling the progress of negotiations, there are often larger matters that understandably require a bit more time to research, discuss, and reconsider. However, it is all too common for one or both parties to become fixated on a certain matter to the detriment of proceeding at an appropriate pace. Unfortunately, protracted negotiations may cause one party to lose interest and thus care must be taken not to become so preoccupied that the whole thing falls apart.

Misrepresented Financials

This is obviously quite similar to inaccurate information, but because of its importance, it merits its own discussion. There is no denying that a vast majority of the decision to merge with or acquire another company rests on the financial ramifications of doing so. For this reason, any realization that one party’s financials were misrepresented, regardless of whether it was deliberate or just an unfortunate oversight, will almost certainly derail the deal. Thus, companies must ensure that they have all of their financial ducks in a row before pursuing a deal.