Deal Fatigue – The Causative Agent for many Deal Failures

We shall exploit this subject in the context of mergers, acquisitions and divestitures. Deal fatigue is the
feeling of exhaustion that is experienced in the course of pursuing a deal in buying, selling, financing or
investing in a business. It is commonly experienced when the period of negotiation is extended past the
predetermined timeline. This feeling of mental and emotional breakdown can be felt by either parties
involved. If not given enough attention at infant stages, this problem can easily grow to uncontrollable
levels and ruin a good deal that would otherwise have good chances of closing successfully.

Having seen a few and read about a ton of others, these are some of the causes I find worth noting if
you are ever involved in the negotiations that could take months or years.

Causes of Deal Fatigue

Incomplete Information

In the course of pursuing a deal, either or both parties involved might fail to provide critical information
that contribute to the success of the negotiations. Deals cannot be realized in the predetermined period
if any vital information is knowingly or unknowingly held back. If this information is knowingly held back,
an environment of distrust easily sets in and leads to the whole thing falling apart.

Changing terms in the course of negotiations

When deals start, it is important to stay committed to the terms outlined. When these terms change
once the negotiations commence, there is a high chance that the process will take longer and hence deal
fatigue naturally sets in. Changing terms might be brought about by sudden changes in the earning
margins in the course of discussions or even incompliance with the government policies that could be
unearthed at a later stage.

Absence of Industry Experts

Some deals require the input of experts to handle subject matter before the sale comes to a close. An
example might be a deal in the oil and gas industry. This deal will require approvals by the concerned
government ministry and a representative present in the course of discussions to ensure compliance. If
these terms are not met, the deal can easily extend past agreed time because of the lack of input on an
expert in the oil and gas industry.

Multiple Advisors and Stakeholders

When many advisors are involved in negotiations, it is vital that they come up with plans to harmonize
the process of sale or investments. Deals have ended in fatigue when the sell-side and buy-side advisors
cannot agree on common action plans to pursue. The result is that the process takes longer and either
side can easily drop off mentally and emotionally hence deal fatigue. Multiple stakeholders from either
side might also stress the negotiation process when each one of them have different views on the best
way to proceed.

Indecisive Parties

Parties heading to the negotiation table might not be emotionally and mentally committed to the
process that is to follow in months or years. This is commonly seen in sellers who underestimate the
demanding nature of the deal making process. If they come in unprepared, there are higher chances
that they will be undecided on a number of things that contribute to the overall success of the deal.
Indecision on either side therefore prolongs the time it takes to close.

Complex Deal Structures

Some deals are more than a straight line that is set out at the preliminary meetings. Once commenced,
they become wavy lines and soon end up in complex structures that were not anticipated at the onset.
Keeping the momentum of such deals become difficult and the starting motivation wears out only to be
replaced by fatigue.

Frequent Distractions

The parties to a deal are easily distracted since these are professionals with busy schedules that are
easily filed up. Keeping the starting momentum for a deal whose parties are always busy somewhere
and without a dedicated project manager becomes an uphill task. The loss of momentum will be
replaced by a strong fatigued environment without much effort from either side.

When the causes above are not checked in time, there are very high chances that the deal ends
prematurely without any winner. Both parties lose on their goal to see the deal to a profitable end.

It can also lead to compromise by either side hence only one party ends up achieving what they set out
to do. It is therefore super important to set out with enough preparation and ways to handle deal
fatigue in the unfortunate event that is occurs.

In our next article, we shall cover ways of mitigating deal fatigue. Or better yet, fully avoiding this deal
killer.