Top Signs of Trouble with an M&A Deal

November 6th 2023 | Posted by Phil Scott

Not all CFOs have direct experience in mergers and acquisitions (M&A) deals. However, those who do develop valuable skills that help them to see signs of potential problems. They can also utilize their financial vantage point to the advantage of the organization by advising how to deal with potential obstacles and keep the deal on track.

So, what signs of trouble with M&A deals do top CFOs spot? We will introduce you to three of these signs and discuss why they are important.

Changes in the behavior of the other side

Experienced CFOs know to watch out for changes to the normal behavior of the other side during the M&A process. For example, board members may begin to pay closer attention to the process, whereas they have previously kept their distance.

This could be a sign that they are having doubts about the deal or want to make changes. If this is the case, the CFO and other board members know the importance of being prepared.

So, when changes in behavior happen, expert professionals know to take a step back and look at the deal from the other party’s point of view. Doing this helps to identify any doubts they may be having and gives the CFO and the rest of the board the opportunity to plan and mitigate potential risks to the deal.

Issues with responses during the due diligence process

The due diligence process is a vital aspect of any successful M&A deal. It necessitates the provision of an array of financial information by the other side. For example, financial accounts and tax returns should be made available. Any delays in the provision of this information could be a sign of issues that may delay or scupper the deal.

However, delays do not necessarily indicate problems; it depends on the individual deal. Experienced CFOs recognize that some questions require in-depth answers that take more time to deliver. They are also able to see when the other side is being evasive and seems reluctant to provide necessary information. If this happens, it’s a red flag that there may be problems, and further questions and investigations are necessary.

Evidence of a lack of organization from the other side

If meetings and communications with the other side are difficult, arduous, and take longer than expected to organize, this can be a sign that there is a lack of commitment to the deal. CFOs who are experienced in M&A deals know to look out for signs of disorganization. They pay attention to whether meetings happen when they should and whether any issues identified are addressed in a timely manner.

If there is an obvious lack of organization and cohesion, they further assess the reasons why. There could simply be a lack of experience on the other side. If this is the case, top CFOs can initiate actions to bring the process back on track and ensure its successful completion.

The most experienced CFOs see these signs of trouble with an M&A deal and are able to act accordingly.