Even with the best planning, not all mergers and acquisitions reach completion. Deals can collapse late in the process often after considerable time, effort, and cost have already been invested. For business owners, this can be both frustrating and disruptive.
In the course of my career, I have advised on transactions at every stage, including those that didn’t close. Drawing on recent experiences, this article outlines the key reasons why M&A deals fall through and, more importantly, what you can do to protect your position and move forward with confidence when they do.
Why do M&A deals collapse?
Several factors can derail a deal, even in its final stages:
Financial disagreements
Valuation disputes, payment structures, or concerns over the financial stability of a party are common deal-breakers. Disagreement over liabilities, penalties, or pricing assumptions can quickly halt progress.
Regulatory roadblocks
Transactions in regulated sectors or involving foreign investment often require government or industry approvals. If these are delayed or refused, the deal may be abandoned.
Unfavourable due diligence findings
The due diligence process can uncover legal, tax, or financial risks that change a buyer’s view of the target. Unresolved issues or discrepancies may render the deal unviable.
Failure to satisfy conditions precedent
M&A agreements often contain conditions that must be met before completion (e.g. shareholder approval, financing). If these aren’t satisfied, either party may have grounds to walk away.
What to do when a deal falls through
If your transaction has fallen apart, it’s important to take quick and strategic steps to protect your business.
1. Review the termination clause
Depending on where you are in the transaction, you want to first have a look at the termination provisions in the binding agreement.
If you are still in the contract negotiation stage, you’re still only bound by the Heads of Terms/Term Sheet (binding sections only), but if you have completed negotiation and parties have signed the substantive agreement (SPA, APA or other), then you are bound by the provisions of the substantive agreement.
So, start by looking at the termination provisions. These will outline the grounds for lawful termination. It’s important to note these two points in relation to termination:
- Termination for breach: If one party failed to meet key obligations, which then led to the break down or termination of the transaction, the other party may have the right to terminate and seek damages.
- Termination fees: Some contracts include break-up or reverse break-up fees to compensate the non-breaching party for time and cost invested.
Carefully reviewing these clauses with your solicitor will help properly assess your options.
2. Assess breach of contract risks or claims
If the M&A deal failed due to one party’s breach of the contract, the other party may have legal grounds to pursue a breach of contract claim. This could cover direct costs (such as legal and advisory fees), lost business opportunities, or reputational harm. Depending on the terms of the agreement, dispute resolution may involve other forms besides litigation, such as arbitration, negotiation, or other alternative means.
3. Consider renegotiation or alternatives
Not all is lost when an M&A deal falls through. In many cases, it may be possible to renegotiate terms or find alternative solutions. If the commercial relationship is still viable, negotiations can resume with new terms that better reflect the current realities of the business landscape.
- Renegotiate terms: Adjust pricing, payment structure, or deal scope.
- Explore alternative structures: Consider asset sales, licensing, or joint ventures as more flexible options.
An experienced corporate solicitor can help you restructure the deal to preserve commercial value while minimising legal risk.
4. Protect confidential information
During negotiations, you likely disclosed sensitive commercial data under an NDA. If the deal collapses, it’s essential to:
- Ensure ongoing compliance with confidentiality provisions
- Monitor for misuse of proprietary information
- Take legal action promptly if you suspect a breach
5. Mitigate financial losses
Some costs may be recoverable, either through contractual claims or insurance coverage (e.g. transactional risk or business interruption insurance). Review your insurance policies and speak with your advisers about recovery options.
6. Communicate with stakeholders
Transparency and reassurance are key. A failed transaction can affect staff morale, investor confidence, and customer trust. You can manage stakeholder expectations by:
- Communicating clearly with employees about next steps
- Updating investors and business partners on revised plans
- Reinforcing your company’s long-term stability and strategic direction
Next steps
While a failed M&A deal can be disappointing, it doesn’t have to derail your strategic objectives or business growth. With the right legal advice, you can assess your position, mitigate losses, and explore alternative opportunities with clarity and control.
We support business owners through every stage of the deal cycle, including when things don’t go to plan. If you are considering an M&A deal now or in the future, consider engaging solicitors with extensive experience from the onset, as they will provide expert advice and insights that will help you achieve the best possible outcome.
Get in touch with our Corporate team at Glaisyers ETL and we will be happy to help.
