Top 8 M&A Mistakes: Part Two

With clear communication comes a successful deal. This not only means being clear with what you are presenting to the potential buyer or seller, but it also means being up front with all pertinent information. Below is our continued list of the top eight common M&A mistakes you should know.

5.) Withholding material information.

Material information is any bit of information that might have a prolonged impact on the company. Material information can be a lawsuit, the loss of a major client, an environmental issue, etc. Failure to disclose such information means that the seller is acting in bad faith and deceiving the buyer by omitting important information. The seller is obligated to inform the buyer of all material events.

6.) Speaking about the deal before it closes.

Depending on the terms of the letter of intent, informing outsiders about the deal may lead to a breach in confidentiality. If one or both of the companies is public, disclosure of the insider information may be considered illegal. Even if the buyer and seller are private companies, improperly disclosing M&A deal discussions may harm one or both companies.

Often a buyer might become ambitious in the process of forming an M&A deal. This might lead a buyer to make a quick irrational decision, and while not malicious, it could cost them a successful closure.

7.) Calling the seller’s employees without permission.

Occasionally, buyers have been known to pick up their phones and call a seller’s employees prior to the closing of an M&A deal. Although this behavior is not normally malicious, it is still considered to be unacceptable and poor form. Informing an unsuspecting employee about a deal can cause havoc in the seller’s business, much like breaking confidentiality can. Buyers should always follow the chain of command and only speak with those people who know about the deal. Always be sure to go through the proper channels.

8.) Calling the seller’s customers without permission.

Customers are the most important relationship for the seller, and a buyer who carelessly contacts a customer and informs her about the pending deal may cause that customer to find a new vendor. This kind of breach can hinder an M&A deal, as well as cause harm for the seller. Similarly to contacting the seller’s employees, a buyer should only contact those who are informed of the deal. 

If you are in need of guidance during a merger or acquisition, contact one of our experienced brokers today.