Top 10 Reasons M&A Transactions Implode     (A Lawyer’s Perspective)

Top 10 Reasons M&A Transactions Implode (A Lawyer’s Perspective)

By Karyn Bradley & Vanessa Grant, Gowlings | January 15, 2014

1.   We don’t see eye to eye

  • Use a deal memo: if you can’t write it down, there’s no deal
  • Cover the following: who, what, where, when, why
  • Doesn’t have to be (and shouldn’t be) more than two pages long
  • After you have the initial draft done, get your professional advisors involved

2.   I Don’t Need Advice…

  • Bring on the professional advisors, they really do add value
  • Unless you are a professional advisor yourself, professional advisors have generally seen more transactions than you have
  • They know the right expertise to bring to the table
  • They have specific areas of expertise: finance, industry-specific expertise, subject matter expertise, etc.

3.    I’ve Got a Secret….

  • Don’t disclose too soon: people talk more than you think, particularly if the gossip is good
  • No discussions with anyone until you have a comprehensive NDA in place – your advisor can provide you with a template
  • Plan the employee disclosure process

4.    Not to Worry – I’ve Got the Tax Covered

  • It’s one of the only two certain things …
  • Think about tax early and often
  • Deals can be structured to be tax advantageous to the parties
  • It costs a lot more to do your tax planning later in the transaction, compared to doing it right at the beginning
  • Don’t just concentrate on income tax, but transfer pricing, commodity taxes, import-export duties associated with the business, etc.

5.    Due Diligence. Really?

  • Yes, really
  • It takes longer and costs more than you think
  • Business is complex and competitive
  • A buyer needs to know as much about the sellers’ business as the seller does
  • It can make (well organized, reps look true) or break (a mess, looks like the seller is hiding things) a deal
  • If a seller, use an electronic data room: makes diligence quicker and confidential and you can track who is in the site when and the information that they are most interested in

6.    Skeletons in the Closet

  • Don’t hide them
  • Admit them, explain how they were dealt with
  • If you are a buyer, ask!
  • Trust your instincts – if something does not seem right, there is probably a reason

7.    We’ve Already Agreed on the Business Terms,

       What Else is There to Do?

  • Deals take longer and cost more than you think
  • There are always issues that arise at the last minute

8.    My Shareholders Don’t Like the Deal

  • Make sure you know the legal requirements for approval and the related timing issues well in advance
  • Get people on-side (particularly if a family deal)

9.    Neither Do My Employees and Customers

  • You can’t keep everyone happy: assume that some employees and customers will not like the deal
  • Who are the employees and customers who really matter? What is your plan for the others?
  • Ensure the message is managed in a cooperative way
  • Manage the process to obtain third party consents to the transaction
  • Pay employee bonuses after closing

10.    I’ll Get Around to That After the Deal Closes …

  • For founders/owners: plan your post-closing career long before the deal closes
  • For buyers: ensure your integration team is on board and starting the integration immediately after the purchase agreement is signed before the deal closes (always subject to anti-trust concerns)


Karyn Bradley is the Office Managing Partner in Gowlings' Toronto office. She is a Partner in the Business Law Group and chair of the National Precedents Committee.

Vanessa Grant is a business law partner in Gowlings’ Toronto office. Her practice focuses on corporate finance, mergers and acquisitions, corporate governance and private equity.

Gowling Lafleur Henderson LLP is one of Canada's leading diversified law firms  with more than 2,000 people, including more than 750 legal professionals, in offices across Canada, and in Beijing, Moscow and London

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