Securing an advantageous M&A deal is a complex and potentially daunting undertaking; one with the potential to stir up deal-ending conflicts between buyer and seller. In fact, according to Financier Worldwide, 10 % of all M&A deals conclude in a dispute of some manner.
This is where business brokers can come into their own, stepping into the breach to highlight potential problems, restore order, and negotiate an outcome that works well for everyone concerned.
In this concise guide, we’re going to cover some of the potentially deal-killing conflicts buyers and sellers can face during the M&A process – and we’ll reveal how business brokers can help prevent these differences of opinion from derailing your deal.
Valuation disputes
Clashes over asset valuations are a common source of conflict in M&A deals. They occur when the buyer and seller disagree over the valuation of a company’s assets – which, in turn, influences its purchase price – and can result in protracted negotiations or even the potential collapse of a deal.
There can also be serious legal ramifications of a valuation conflict, with the buyer or seller – or perhaps even both – seeking costly legal assistance to resolve the dispute and settle on a fair price for both parties.
To avoid forking out for legal fees or dragging out a deal as you argue with the other party over their valuation, you may wish to hire a business broker from the very beginning. Drawing on their experience and unique expertise, business brokers can use several different methods to provide an accurate valuation of the company that’s up for acquisition, preventing any disputes from breaking out regarding the price.
Conflicts over deal structure
Differences of opinion over deal structure are also a common factor that can seriously hamper M&A deals.
For example, conflict can arise if a seller wishes to include an earn-out provision in the contract (meaning they will receive extra money tied to the company’s future performance). A potential buyer may not be happy with the terms of this provision, which can lead to a significant dispute that could have the power to kill the deal altogether.
Similarly, buyer and seller may want very different things regarding the payment plan for the transaction and this can create a major stumbling block in negotiations.
Here, again, having a business broker involved from the get-go can prove invaluable. A business broker can help the buyer or seller create a clearly defined set of goals for the deal at the very start of the process and ensure that this is clearly communicated to any interested parties.
This kind of upfront transparency will help to weed out any unsuitable prospects and ensure that only those targets that are amenable to the proposed deal structure will be considered for the transaction.
Due diligence difficulties
Due diligence is a critical stage of the acquisition process, but it can also lead to deal-killing conflict if handled poorly – or if a seller withholds crucial information about a business that could cause problems post-sale.
To avoid those potentially severe issues, you can hire a business broker to oversee every aspect of the M&A process, including due diligence. They will help to ensure that all relevant data is organised and made accessible to the buyer, and they can handle any queries from both sides.
They can also offer nuanced advice on every aspect of due diligence to ensure that the buyer knows what they need to evaluate and any hidden costs or issues they should look out for.
Why use a business broker to help protect your investment?
Acquiring a business is a weighty financial decision that leaves you open to potential losses should anything go wrong. To safeguard your investment as effectively as possible, you may find it beneficial to hire a business broker to mediate your sale and help protect your interests as you navigate your way toward the completion of a deal.
Business brokers can help in a variety of ways, from providing an accurate valuation of the business you wish to pay – thereby preventing the overpaying risk mentioned above – to drawing up non-disclosure agreements to protect sensitive financial information, and assisting with negotiations and due diligence.
From the opening stages of the acquisition to signing the final contract, business brokers guide you through the intricate nuances of the M&A process while helping to ensure the protection of your investment.
Safeguarding your acquisition with Harris Acquire
As a trusted UK business broker, Harris Acquire is perfectly positioned to help you buy a business that will provide a good return on your investment.
Our expert team will be on hand from the beginning, helping to locate and verify potential acquisition targets. From there, we can handle everything from valuations to negotiations, due diligence – and sealing the deal.
