Does Your Manufacturing Company Need a CFO or a Controller?
This blog was originally written in 2021. It has been updated with new references and resources.
August 11, 2022 - While the quality of assets and the business remain the primary focus in mergers and acquisitions, every deal garners some sort of psychical and emotional toll. Like any emotional process, fatigue is a very real element in transaction, whether buying, selling, investing, or financing. Deal fatigue can even kill the entire transaction–but with the right education and planning, you can minimize or avoid its effects.
Avoiding M&A deal fatigue requires setting expectations, educating both parties, and sticking to the process plan.
In the context of mergers and acquisitions, deal fatigue is the mental and emotional exhaustion that sets in as a transaction stretches on. Deal fatigue can cause sellers to "shut down" (stop engaging in meaningful conversations) due to feelings of frustration, irritation, and helplessness, creating new barriers for the deal and exacerbating ones that might already exist.
The causes of deal fatigue can be as unique as the deal itself. These are just a few scenarios we have seen lead to M&A deal fatigue:
Deal fatigue can affect all parties, but it is more common for sellers to feel the effects of fatigue than buyers. They care about the years they have given to the company, their own legacy, and taking care of the company’s people–a clear indication of the emotional investment in the sale of their business.
It makes sense why fatigue can kill a deal. Whether buyers are unable to get the information they need to close or the seller is walking away out of frustration, deal fatigue is a common factor in unsuccessful transactions. Even in transactions where fatigue does not kill the deal, the fatigue can turn a smooth transaction into a painful process.
For instance, it can cause a shift in timelines and subsequently affect valuation. If a buyer is unable to get the information they need when they need it, they will be less comfortable with the deal and could change the terms of the deal to match.
The avoidance of deal fatigue often is in the court of the seller and their advisor(s). Before the deal begins, there needs to be a focus on preparation; once the process begins, best practice is to have constant communication and set touch points. Here are some basic steps to take if you want to minimize the impact of deal fatigue (or even prevent it entirely):
Have a support team that you can talk with and lean on. The M&A process can be intense, and some sellers simply are not ready. Deal fatigue is a combination of physical, emotional, and financial stress, so take your time before the process begins. Even once the wheels are in motion, be aware of your limitations and take time off if needed–communicate with your team and the buyer so you can set expectations and hit the ground running.
Preparation is the number-one way to avoid deal fatigue. Sellers need to be proactive rather than reactive to prevent the stressors that can lead to the catch-up, last-minute adjustments, apathy, and miscommunication that cost time and effort while decreasing a buyer's confidence.
This blog was originally written in 2021. It has been updated with new references and resources.
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Editor's note: This piece was originally published in 2021 and has been updated to include additional resources.