Our recent event held on Thursday 14th May at The Royal Air Force Club, in partnership with HMT LLP and HCR Law, brought together senior leaders to examine a familiar frustration in M&A: a substantial minority of transactions fail after headline terms have already been agreed. The reasons are rarely dramatic.
Opening the discussion, Mark Sheldon, Founder at Savant reflected on a point recognised by many leadership teams involved in transactions. Deals seldom drift because of one unforeseen event. More often, pressure exposes issues that were already present but insufficiently tested. Assumptions that felt manageable become harder to support. Questions deepen. Momentum slows.
Many of the reasons transactions struggle are predictable. The more useful question is what leadership teams recognise early enough to influence the outcome.
That discussion took place against a backdrop of cautious optimism. Recent economic data pointed towards resilience in parts of the UK economy despite continued uncertainty and uneven sector performance. Good businesses continue to attract interest. Transactions continue to happen. The challenge for leadership teams is less about waiting for ideal conditions than being sufficiently prepared when timing matters.
Preparation surfaced repeatedly throughout the evening, although not in the conventional sense. Most businesses think about readiness through documents, advisers and process. The discussion focused more on resilience under pressure. Transactions place demands on leadership teams that are easy to underestimate. Management attention shifts towards diligence, presentations, negotiations and repeated requests for information at precisely the moment operational performance still needs to hold.
Wendy Hart, Partner at HMT LLP, focused much of the discussion on the commercial consequences that can follow. Forecasts underpin valuation, yet a process itself can begin to affect the business being sold. For some businesses, trading softens. Forecast assumptions that felt reasonable at the outset become harder to evidence. Leadership teams can find themselves defending positions that felt entirely manageable before scrutiny intensified.
One disappointing month rarely changes a transaction in isolation. What weakens is confidence in the assumptions supporting value. Questions deepen, timelines extend, momentum becomes harder to sustain.
The practical demands of due diligence received similarly direct attention.
For many leadership teams, particularly first-time sellers, the intensity of a process comes as a surprise. Questions return in different forms, information already provided is revisited, timelines move whilst businesses continue operating under ordinary commercial pressure.
The transaction does not pause the business, it runs alongside it.
Financial diligence was discussed in practical rather than technical terms.
Tax liabilities, accounting policies, deferred income, EBITDA adjustments, working capital and unrecorded liabilities surface in many transactions. None are unusual. Difficulties tend to emerge where businesses encounter these issues for the first time during diligence rather than beforehand. Vendor readiness, organised information and coordinated advisers were repeatedly discussed as practical ways to reduce avoidable friction before a process formally begins.
Rachel Turner, Head of Corporate at HCR Law, continued the discussion through a legal perspective, although many of the underlying themes felt familiar. Most legal issues are manageable but late surprises are harder. Earn-outs, deferred consideration and investor protections can work effectively where expectations are understood clearly. Difficulties tend to emerge where commercial implications are interpreted differently or only fully understood once momentum has already been built. Trust surfaced repeatedly throughout the discussion, not as something dramatic, but as something cumulative. Confidence weakens where surprises begin to accumulate faster than they are resolved.
The same principle applied to legal diligence more broadly. Commercial contracts, change of control provisions, intellectual property ownership, employment arrangements, GDPR, property obligations and wider regulatory matters surface in most transactions. The challenge is rarely their existence. More often, it is timing. Issues identified early tend to be manageable. The same issues identified later can alter leverage, extend timelines and place additional pressure on a process.
Tax planning, particularly around EMI schemes, provided another example of preparation shaping outcomes. Structures that appear straightforward during ordinary trading conditions can receive greater scrutiny during a sale. Weak implementation or incomplete documentation may remain unnoticed for years before becoming materially more significant during a transaction.
The discussion remained practical throughout. Most transactions do not fail because of one decisive moment. More often, pressure changes the significance of issues that previously felt manageable. The same issue identified early is usually manageable. The same issue identified late can alter momentum, reshape negotiations and place unnecessary strain on a process. Preparation, in that context, is rarely administrative, it is the work undertaken before scrutiny intensifies.
We thank our speakers and the senior leaders in attendance for contributing to a rigorous and thoughtful discussion.
