Appallingly common M&A mistakes.

• Author: Harmon, Edward B.
• Position: Mergers and acquisitions

After 20 years of providing legal advice to clients involved in acquisitions, divestitures, and restructurings, I often have a feeling of deja vu. Some of these deals, unfortunately, have not been successful. But what continually amazes me is that often they don't work out because the buyers commit certain fundamental errors that recur with appalling frequency. As a result, I have compiled my personal list of "sweet 16" (maybe sour would be better adjective) of common M&A mistakes that are made before a deal closes.

Lacking a Focused Strategy and Clear Understanding of the Competitive "Mix" of the Industry. Any buyer (other than a leveraged acquirer that is purely opportunistic) must understand the dynamics of the business and industry in which it is engaged and have a clearly defined acquisition policy in order to determine the type of targets it will consider.

If this strategy does not exists, the buyer will be inundated with so many proposals, offering brochures, and telephone calls that it will be impossible to devote adequate attention to all of the prospects. Hence, the one opportunity, out of many, that may fit the industry and strategy may not be identified.

Pricing the Target Alone or "Falling in Love" With it. Overpaying, either directly or indirectly, is unbelievably common. Once a prospective target has been identified, a knowledgeable financial adviser should be consulted. At this stage, the buyer should clearly analyze the value of the property to its business. And while every acquirer believes that it knows "value," it is wise to engage an outside professional, except in the rare cases in which in-house expertise is at hand, to help value the target from a number of perspectives.

Objective, third-party analysis is particularly critical if outside financing will be required to "close" the deal, since lenders or investors must be convinced that the buyer is not overpaying. The financial adviser must be consulted before an offer is made so that it can be structured optimally from a buyer's perspective and increase the chances of success in securing financing. Financing sources should not be approached until a professional presentation has been developed.

Failure to Retain Legal Counsel Experienced in M&A. Prior to actually "making" an offer, engage legal counsel experienced in acquisitions and divestitures. Even though you may have utilized an experienced and competent lawyer for many years, if he or she is not experienced in...