While most company sales are successful, some deals do fail after the deal has closed. And while it may be surprising, there are some common reasons. This is why it is important to have an advisor representing you who makes sure the seller’s goals meet with the buyer’s expectations. It is also critical that the parties participate in a comprehensive due diligence process. These steps can help foreclose the following issues:
Post-Closing Integration Fails. Merging two companies can be a difficult process. When two companies combine, the new company often immediately transitions to the buyer’s financial, operational and sales systems. The integration may be such a distraction to the company’s management team that the managers lose focus on running the company.
Poor Strategic Fit. Buyers often look to synergies in financial, operations, and marketing and sales processes when deciding to buy a company. If these synergies are not realized, the deal may not be successful for the buyer.
Cultures Don’t Match. The company cultures may not be in alignment. Cultural differences may lead to key employees leaving or customers going to a competitor. Losing key talent, having unmotivated employees, and losing key customers can result in significant reduction in the company’s performance.
Financial Missteps. The new owners may not have planned for adequate working capital following the closing date. The buyer may overspend in computer or equipment upgrades or other expenses following the closing contributing to poor financial performance.
Due Diligence Failure. The buyer may fail to do adequate due diligence on the company’s market, competitive position, supply chain and employee issues, all which can result in the buyer being unprepared to respond to those issues once the deal closes.
Company acquisitions can be very successful, but buyers should not lose their focus on post-closing issues when working to get the deal closed. If you need help selling your company or understanding post-closing issues, you can contact us at sseck@seckassociates.com.