You can’t help having noticed a flurry of corporate acquisitions and investments reported recently.
The timing is no coincidence. The school holidays are upon us. Most deal timelines start with an ambitious 10 week plan from when the heads of agreement are signed. There is a lot to do, five types of due diligence to complete, seemingly hundred of documents to agree and a bank to get on board.
That’s alongside numerous egos to stroke, and contract realities to explain. Almost invariably the timeline slips. It was supposed to have completed long before now. Who would plan to complete a complex multi-party international deal in July? The reality is that the timetable is rarely the determining factor, however much the parties pay lip service to it at the start. More often than not the timeline becomes an embarrassment by week three of the plan. All parties are politely ignoring it by week five.
Deals are more about people than process. This is accentuated when the holiday season is upon us and the deal remains undone. Crisis time. Doing deals needs momentum. Doing deals burns cash like driving Formula 1 racing cars. Whilst the ride is exhilarating, you need to get to the champagne before the deal crashes and before the costs escalate beyond what your sponsor can smile through. Holidays can suddenly seem like the biggest threat.
In April you were concerned about the accounts, in May the tax, June the joint ventures. Now it’s July, you are worried that if you don’t sign imminently it’s going to be September before you can reassemble and focus the numerous stakeholders to get past the finishing line. Nobody updated the timeline for the summer. Nobody said they had holidays planned (although everyone had).
Even if you are the party most commercially desperate to complete the deal (Porsche ordered, anticipated bonus spent) you can’t ignore that your family are important stakeholders too. Deals take long hours. Deals consume weekends. Spouses’ valuations of career progression/bonus/job satisfaction/financial independence rapidly depreciates over time. Invariably the family has been placated by the promise of sunshine, a sandy beach, no phone. Easter vacation was disrupted. Summer was when you would make up for it.
As for the business case, the target company’s trading has moved on. If negotiations fall into the autumn someone may want to renegotiate the price. The accountants may need to refresh their due diligence. Costs will escalate. The board will meet again. A dividend will be due. The exclusivity of negotiations will have expired and a cash rich competitor (with a higher tolerance for risk) may appear and seek to steal the prize – or the buyer’s bank may reconsider the group’s acquisition strategy. Reality is they probably won’t, but these are risks you take.
After agonising reflection you hit the send button on your presidential speech to the team. The auto-replies tell it all. Colleagues’ emails will be checked from time to time. Happy holidays. Time to join them?
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