Friday, January 13, 2012

Two Potential Surprise Deal Killers

There's an old saying "failing to plan is planning to fail."

An experienced transaction advisor will have a plan to anticipate and address potential risk issues early in the transaction process.

We have learned the hard way to ensure both the Buyer and the Vendor are aware of any distribution agreement requirements and of significant reliance on one customer for revenues.

Case 1: Distributor for fire detection and protection equipment completes the sale of their business to private buyer. Upon advising Honeywell of the new owners' intention to attend the training classes, Honeywell exercised their “change of control” clause and terminates the distribution agreement. After all that time, energy and money…deal dead!

Case 2: Very successful oil field equipment supplier business has three clients; one client (EnCana) represents 85% of business revenues. Three days before the deal closes a field hand is flagged for not wearing a hard hat when on a field location. This happened to be the third safety infraction in a short time frame. All equipment returned to the shop and the Master Supplier Agreement was terminated within 48 hours. After all that time, energy and money… deal dead!

Look for an advisor with the experience and knowledge to help you navigate through your transaction risk factors.