In this situation, the reason for the decline needs to be determined. If it is a one-off and temporary, there are measures that can be taken to keep the deal on track, but sharing the risk will be inevitable. If the downturn is deemed to be permanent, then the transaction may need to be renegotiated or terminated.
Lack of Cash at Closing
Lack of cash at closing can occur for several reasons. All of these are problematic as they can result in the Seller not getting their entire closing payment, the business not having enough cash to run, long- term debt not being paid off, etc. The main reason this arises is that the debtors have not paid at their normal rate which could be a fluke or because sales are down just before closing or the commercial lending is less than expected. Often the teams are surprised when this happens at the last minute. To mitigate this, very careful cash flow planning should be done at least a month before closing and monitored very, very closely until the day of closing. Contingent plans should also be put in place if there is any chance an issue could arise.
Lawyer Issues
The process of working through an M&A transaction is much more like a wedding where two parties are coming together for the same mutually beneficial event, with a natural tension between both families and some pre-nuptials. The problem is that most lawyers are trained and geared toward managing a divorce and do not understand that an adversarial approach in an M&A transaction may kill what was actually a good deal for both people. A good M&A lawyer will understand this and hold ground on important points but always have the bigger picture and respectful relationship
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