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Common Mistakes Made by Buyers in the M&A Process and How to Avoid Them

Navigating the complexities of M&A transactions can be daunting. With high stakes involved, even seasoned buyers can find themselves facing unexpected challenges. In my experience closing over $10 billion in transactions since starting Dean Street Law in 2019, I've identified common mistakes that buyers often experience—and, more importantly, how to avoid them.


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1. Engaging Legal Support Too Late

Some buyers wait until the last minute to engage legal counsel to try to save money, but it is important to have legal support when negotiating LOIs if a buyer does not have significant experience doing so. At a minimum, legal counsel should be engaged immediately after an LOI is signed. Early legal insight will help shape your acquisition strategy. We provide cost-effective support through our "Acquisition Insights: Legal Roadmap for Success" course, having over 81 lessons with video lessons and written materials, guides, checklists, template LOIs, and more. In addition, at Dean Street Law, we offer flat rate packages to draft and negotiate LOIs to provide our clients with a solid legal foundation for their acquisition.


2. Relying on Generic LOI Templates

The Letter of Intent is the foundation for the entire transaction. Therefore, the structure and the legal terms must be correct and well established at the LOI phase. Many buyers will use an LOI template from the internet, another source, or use ChatGPT to draft it. Every single LOI template that I've seen online is not what I would want my clients to sign. They are woefully inadequate in terms of protections and clarity between the parties, and they are missing a lot of key provisions that make doing business and the acquisition process considerably easier. The quality of the LOI directly impacts the transaction as a whole. The likelihood that the buyer will lose money in the deal if it goes south is very high. In the Acquisition Insights course and templates package, we provide battle-tested LOI templates that provide adequate protection that the buyer needs as they begin to expend resources pursuing acquisitions, saving them money due to mistakes being made.


3. Underestimating the Importance of Comprehensive Transaction Documents

The biggest mistake some buyers make is thinking that the purchase agreement is the only transaction document needed between the parties. In asset and stock purchases, the purchase agreement does not generally legally transfer the business. In an asset purchase, each class of assets has to be transferred in accordance with the procedures provided by law. In a stock purchase, you have stock powers and stock certificates that need to be transferred. Acquisition Insights provides video lessons and written materials on the various material contracts needed in each type of transaction. in addition, the Acquisition Insights course and template bundle includes a closing checklist and timeline with all the material documents needed for the transaction, and when you work with Dean Street Law we provide a custom list of all the transaction documents we will prepare for you in the scope of work prior to beginning our services. Our consulting services guide clients through compiling every necessary piece of paperwork. You can apply to work with Dean Street Law by clicking the link here.



4. Miscalculating Legal Fees 

Some buyers will focus on whether a law firm will not charge fees or roll over their fees during the acquisition process. You get what you pay for. If you are not paying for legal services as you are receiving them, it is unlikely that you're counsel will be motivated to represent you well and to the best of their ability. We've heard numerous accounts of law firms who offer this refusing to customize transaction documents appropriately since they don't want to spend time on a transaction where they don't know if they will be paid. This misalignment can cost a buyer hundreds of thousands of dollars more than they save. When you have a law firm that won't get paid for a few years, they are not incentivized to provide you with any legal support during that time. The likelihood that they will recover is very small, and the firm will most likely inflate their legal fees up to 300% to account for the likelihood of closing, the likelihood of collection, and the time value of money. Avoid these inflated costs by investing upfront. We are very conscientious of the need to address broken deal costs, so we set our clients up for success so that they're spending a reasonable amount during the due diligence period before they have certainty of the deal closing.


5. Letting Emotions Drive Negotiations

Some buyers will let their ego get in the way of the transaction when it starts to involve deeper negotiations. There can be high tensions and high emotions in the negotiation process. One of the best tools is to engage your lawyer to handle sensitive conversations more neutrally, and the other is to make sure that you never say that something is "non-negotiable". Saying something is non-negotiable can create rifts and provoke emotions that may be difficult to overcome. When you get your ego in the way and say something is non-negotiable, it focuses on what doesn't work instead of focusing on what does work. Work with an attorney who has done this hundreds of times to be able to find solutions that will work.


M&A doesn't have to be a path littered with mistakes. With the right strategies and legal guidance, you can navigate the process smoothly and effectively. Remember, the key to a successful acquisition lies in preparation, clear communication, and a solid legal foundation.


Start your M&A journey on the right foot with Dean Street Law. Explore our "Acquisition Insights" course for over 81 lessons, templates, and more. It also has template LOIs, NDAs, and indications of interest. Not only do we provide battle-tested templates, but we also provide in-depth video tutorials on how to customize them, so that buyers have the confidence that the LOI reflects the intent of the parties.


Need more support? 

We also have consulting so that buyers can have weekly group support with Laura DiFrancesco, who has closed over $10 billion of transactions since founding Dean Street Law in 2019. We also provide flat fee letter of intent drafting and negotiation for our clients so that they have adequate support early on in the acquisition. Ready for a tailored experience? Apply to work with us directly for your next acquisition.

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