Chapter 18
Ten Transaction Pitfalls
IN THIS CHAPTER
Examining issues that might scuttle a deal
Highlighting the aspects of a transaction that buyer and seller should scrutinize
Moving forward with an M&A deal means that both sides sign a letter of intent (LOI). Although the LOI is an important step, rushing and carelessly signing an LOI without fully understanding it can create plenty of problems. To help you avoid problems and increase the odds of a successful closing, this chapter presents ten issues to consider before signing an LOI. (Check out Chapter 8 for the nitty-gritty on LOIs.)
Is the Deal Too Good to Be True?
This caution is especially true for sellers. That great deal the buyer is dangling may be nothing more than a Trojan horse, a ruse to lock up the seller with exclusivity for a period of time before coming back with a lower price after the seller has been out of the market and is therefore in a weaker position. Even if the buyer isn’t trying to pull a fast one, that buyer may be unable to line up the capital needed to close the deal that’s been dangled. (See the following section.)
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A seller needs to be brutally honest with themselves about the company’s value. ...