Your Deal Fell Apart, Now What?

Your Deal fell apart, now what?

Your Deal Fell Apart, Now What?

Despite all the effort, investment, distraction, anticipation, communication and forecasted benefit – your pending transaction has fallen apart?! This, while frustrating, is not uncommon. In fact, roughly 72% (70-90% according to a recent Harvard Business Review) of business combinations that are documented, fail. This is especially true in an uncertain market where we see rapid consolidation amid fluctuating market conditions such as stock prices and valuations. 

At Revenue Rocket our combination failure rates are almost non-existent, and here’s why. Our processes and procedures ensure alignment on the fundamentals but also the cultural and market dynamics that are often ignored till closer to close. Working closely with both the seller and buyer we can bridge the gap between expectations and reality and those can differ significantly under today’s conditions.  

That said we do get a fair number of buyers and sellers that contact us after a pending transaction falls apart. All too often that when a transaction falls apart the “deal fatigue” from the failed transaction can permeate through the culture of the executive team and the common consensus is to inwardly focus on growing the business organically vs salvage the process. We will not argue that the primary focus should always be maintaining a healthy business and strategically identifying organic growth opportunities, but we will argue that shelving your failed process is usually NOT the right move. Here are a few reasons why leveraging an advisor to either rekindle the existing deal or identify other suitors is important:

  • The due diligence efforts are mostly complete and organized in a manner that is easily consumable for engaging in another process. 
  • Financial reporting is audited and up to date (regardless of prior deal write downs or discounts) 
  • The team and you see the benefit in a combination and leaving that value for another competitor to capture is potentially devastating.  
  • The market is consolidating and being on the outside of those efficiency gains can be extremely risky. 
  • Valuations are at an all-time high, but deal structures are also creative these days and it is likely that waiting will yield an inferior result.  
  • The prior suitor (the deal that fell apart) has a disproportionate amount of intelligence on your company, its products and services and while NDA prevents certain infringement the cost of litigation and time to reproduce value they saw in your company will likely extend beyond the term of your MNDA.   
  • Your investors want a deal and are expecting the return on their investment.  
  • It is very possible that the news of the prior pending merger got out and the market will draw its own conclusions as to why it fell apart. Controlling that narrative is important. 

The reasons go on and on, but the real value is that the true cost of the failed transaction could be far from over and leveraging a professional M&A advisor to help find a new deal could be what turns a negative situation into an even better result. Keep in mind an advisor like Revenue Rocket has other deals pending or they are representing companies looking for something or someone like your firm and at a minimum can shed light on why the prior transaction failed.  

In summary, just because a deal fell apart it does not mean that the process is dead. It typically means that the combination was doomed from the start and that a better outcome is around the corner. If you are one of the many that have experienced a failed transaction, give us a call and see what we can do to help restore hope for everyone involved and extrapolate your investment into the process with a high degree of certainty. Contact us at www.revenuerocket.com/contact-us/ or info@revenuerocket.com