Top Reasons Why Deals Fail Today

733Park Podcast Plug-In

Top Reasons Why Deals Fail Today

In this week’s 733Park Podcast Plug-In, we check out The Tech M&A Podcast episode Tech M&A Monthly: 5 Reasons Why Deals Fail Today. The Tech M&A Podcast discusses the latest trends and mergers & acquisitions in the technology industry.

Let's dive into the episode!

M&A in the tech industry is the busiest it’s ever been since the .com era. There are far more buyers and sellers excited about growth opportunities, which has led to quicker and greater deal closings. Also, since the pandemic, strategic buyers like Microsoft have been acting faster and more aggressively when valuable opportunities present themselves. In addition, with the rise of technology use due to the pandemic, firms and organizations that usually wouldn’t be involved in tech M&A opportunities, are involved, in order to take advantage of the profitable growing tech trends.

Top 5 Reasons Why Tech Deals Fail Today

1. Lack of Honesty: Not being truthful about pending litigation, regulator issues, partnerships, or licensing problems are ruining deals. Uncovering red flags towards the end or after a deal will spoil a relationship. It’s important to remember you'll probably be working with those you sold to after the deal.

2. Presenting Unrealistic Projections: Of course, you want to present substantial numbers and excellent growth projections as a seller. Although, far too often, the biggest issue in the due diligence period is the seller's financials were wrong, or they fell short of their projections. Not hitting the numbers you projected is alarming in a deal and will require some explaining.

3. Lack of Answers and Proof: Answering any questions an interested buyer may ask and showing proof with those answers is curial. Responding with “we don’t have that answer” or “we never thought to look for that answer” will undermine and delay a deal.

4. Only One Buyer: You should always be talking with multiple buyers in tech M&A. After you manage to find your ideal buyer, how do you get the right price and structure in a deal without the leverage of other bidders? Creating competition for your buyers will drive the prices up. Having only one buyer is very little in the bigger picture.

5. Bad Storytelling: You are selling your company. Overusing abstract concepts and statistics will take away from the story of what you do. The goal in selling your company's story is to be straightforward and relatable. People won’t invest in something they can’t understand or relate to.