There’s a term for the frustration, helplessness and exhaustion that comes during the negotiation process: deal fatigue. What once began as a hopeful, optimistic and energising prospect for your business or portfolio can fast become wrought with unforeseen complexity, miscommunication and lengthy timelines that sap the enthusiasm and resources from all involved parties and can lead to relationship breakdowns and deal failure.
So what causes mergers and acquisition (M&A) deal fatigue, and what can you do to ease the process? Read on to find out.
Deal Fatigue Causes and Solutions
Cause 1 - Delay tactics
It’s not unheard of for experienced buyers to tactically delay proceedings in order to wear out the seller and secure better terms for themselves. These tactics can take many forms, from excessive due diligence enquiries to protracted proposal alterations. However, there’s no reliable way for sellers to differentiate between earnest requests and deal fatigue tactics.
Buyers who opt to use this tactic should be aware that they run the risk of irritating their sellers, souring relationships from the off and even prompting the deal to be taken off the table – costing both parties time and money.
Solution
The best solution for both parties is to agree upon a realistic schedule and list of requirements at the start of the proceedings. If you’re a buyer, make sure to be considerate of the deal fatigue your requests may cause on the seller’s side. Don’t ask for more information than is absolutely necessary, and provide accurate timelines that everyone can rely on.
You can further reduce deal fatigue by involving a third-party negotiator to manage proceedings and act as a mediator between buyer and seller. A good negotiator will ensure timelines are adhered to, that expectations are reasonable on both sides and that the deal moves along smoothly.
Cause 2 - Lack of expertise
When the buyer is unfamiliar with the service or product they’re purchasing (as can often be the case with tech-related acquisitions), deal fatigue can quickly set in. Buyers may feel they lack the necessary expertise in the subject matter to be able to make informed decisions and can become frustrated as they attempt to navigate the deal without having all the facts.
Solution
The best way for buyers to ease deal fatigue in such cases is to bring together a team of experts to help advise them through the parts of the negotiation that require their input. Having an experienced team in place ensures that every key decision is made with confidence and knowledge, reducing deal fatigue for everyone involved.
Cause 3 - Lack of communication
M&A deals require the attention of people whose time is already in high demand. C-level executives, dealmakers and legal advisors alike can find themselves swamped with back-to-back meetings, emails, calls and paperwork. In this hectic environment, it’s easy for communication to get lost in translation, for meetings to get delayed or for information to not make it to the relevant parties – causing confusion amongst parties, unnecessary repetition of information, and deal fatigue on both sides of the deal.
Solution
Schedule regular catch-up meetings with all deal actors and agree on an efficient system for sharing updates between parties. Post-Covid, most people are comfortable using video conferencing tools, alleviating the need for in-person meetings.
Encourage dealmakers to take a collaborative approach, so that everyone can be kept in the loop and potential issues are discussed as they arise – reducing deal fatigue later down the line.
If you don’t have a third-party negotiator, consider employing the services of a project manager for the deal, keeping relevant dealmakers updated and ensuring that information is reaching all stakeholders in a timely manner.
Cause 4 - Inaccurate or misleading information
Sellers might inflate, exaggerate or otherwise misrepresent aspects of their deal in order to secure a better deal for themselves. This can lead to buyers feeling misled and confused, and the deal dragging on due to lack of trust.
Solution
The most effective way for buyers to reduce deal fatigue is through robust background checks. Buyers can already get a fair idea of the company’s performance through publicly available information before they even enter deal talks.
With a Symanto Due Diligence and Brand Health report, you can quickly get a comprehensive understanding of the company’s operational strength and its market profile, as well as its brand health tracking, media sentiment and online presence.
Equipped with this information, buyers can approach negotiations with confidence and data-based insights to back up their deal terms.
Encourage transparency from the seller, and question any information that appears unclear or inaccurate. In addition, sellers should be sure that their data is up-to-date and accurate before submitting it to buyers – this will help to maintain trust between all parties involved in the deal.
Cause 5: Changing conditions
This is both a cause and a consequence of drawn-out negotiations. Key employees and key account holders can back out as partial details of negotiations leak, changes in leadership can occur, new consumer trends and technologies can emerge, or the deal itself can take so long to close that it no longer makes sense in the same way.
Solution
The best way to avoid deal fatigue due to changing conditions is to ensure that all parties are kept up-to-date with the progress of negotiations. Regular meetings serve as a reminder that everyone involved is still engaged in the deal and any decisions made are still relevant.
In addition, dealmakers should be proactive in monitoring the deal environment, looking out for changes that could potentially affect the deal and addressing them before they become an issue. This will help prevent deal fatigue down the line.
Cause 6: Overoptimistic letter of intent
A letter of intent (LOI) is a non-binding agreement to establish trust in the buyer and seller, but can often be too optimistic and overpromise on deal terms or timelines. LOIs are signed before thorough due diligence, so will often underestimate the deal’s complexity or overlook key deal issues that could later arise.
As due diligence is completed and deal terms are revised, buyers can find themselves in an unexpected situation if the deal is not progressing as expected.
Solution
Buyers should be wary of overpromising before conducting thorough due diligence. Similarly, sellers should be transparent about key issues that will arise from subsequent due diligence research. Buyers should aim to keep LOIs short and general so that they aren’t later bound up in drawn-out negotiations or legal battles.
In addition, dealmakers should ensure that the deal timeline is realistic based on historic precedent and the deal’s complexity, setting realistic expectations from the onset of negotiations. This will help to reduce deal fatigue and ensure that buyers don’t feel misled or tricked by overly optimistic LOIs.
Again, both buyers and sellers can benefit from conducting a fast Symanto Due Diligence and Brand Health report to make a quick assessment before deal talks begin. This will provide a better understanding of the company’s standing and help dealmakers to prepare for any potential issues that could arise during negotiations.
Summary
Deal fatigue is a common problem in M&A deals and can lead to deal failure or even deal cancellation. Buyers and sellers need to take steps to address deal fatigue, such as encouraging transparency from both parties and setting realistic expectations from the outset. With proper planning and management, deal fatigue can be avoided and deal success can be achieved.
Get Speedy Insights with Symanto
With a Symanto Due Diligence and Brand Health report, buyers don’t need to wait on sellers to provide information to start getting highly useful insights.
Symanto applies advanced natural language processing AI to qualitative consumer data to get highly granular insights into factors such as product performance by aspect, brand loyalty, year-on-year performance, and emotion analysis. These insights can help buyers to determine the potential and long-term success of a merger or acquisition. Symanto technology works on over 50 languages, and full, comprehensive reports are typically available in under a week.
With Symanto, buyers can quickly establish which deals are worth pursuing, and get data-based insights before talks commence, helping to ensure a smoother deal process and reduced deal fatigue for all involved.
Start uncovering valuable insights with Symanto now. To learn more about our due diligence and brand health reports, and the cutting-edge AI technology behind them, get in touch with Symanto today.
