Here are just a few ghost stories and some suggestions on how to remain steady.
By Michael Williams, Managing Director, Transaction Advisory Services, BDO USA LLP
Occasionally deal makers have fleeting moments of fright about buying what may seem to be something of a haunted house. Some ghastly surprises may cast a pall on deciding to stay in the deal. With a few days – and late nights --of due diligence, we may find skeletons hanging in closets and monsters lurking under beds. Here are just a few ghost stories and some suggestions on how to remain steady.
What was that?
There are many different noises that keep us up at night as we work through due diligence in an M&A deal. With careful attention, some matters rising through the noise, rightfully, may be alarming. They can be very real - and can spook a deal.
The horror stories not anticipated in the letter of intent or term sheet: Many key aspects of a deal are discussed by the parties early on in the process before a draft of a letter of intent is circulated between the parties. To avoid the perils of deal killers and last minute changes that may strangle a deal, transaction structuring and other major considerations are best discussed with key advisors early on in the process, preferably before the term sheet is drafted.
That said, the drafting of the detailed transaction agreement, which often occurs later, typically addresses the finer points of the deal. So we caution you not to wait until the detailed agreement is circulated between the parties to attempt to influence key deal terms – it may be too late to negotiate what is viewed by the other side as a key matter. In addition to the legal team, some of those who should share thoughts on key deal terms earlier rather than later include members of the financial and operations deal team, human resources, and tax. Read More.
