One Step Forward

August 18, 2008

Before I moved to New York, almost a decade ago, I wanted to unload my truck. I spent the better part of an entire day cleaning the vehicle. I washed it, waxed it, touched up various small scratches, Armour All’d the tires and the bed cover. On the inside I vacuumed, scrubbed out the coffee stains, cleaned the windows, Febreze’d the fabric and spent an hour removing an old fraternity sticker. It was spotless. In fact it was so clean that I felt justified falsely advertising it as a “one owner, non-smoker.” (I don’t think Carfax was around back then).

Since I was moving, I left the truck in my sister’s care to handle the sale. She lived in Maine, on a fairly busy street. If she was a banker, you might say she had direct access to a key market of possible buyers. It also didn’t hurt that she could handle the sale after I moved, removing any pressure to just hand over the keys to the first bidder.

What I wasn’t counting on was that she would use the truck to move dirt piles and tree stumps. It was also better on gas than the Bronco, so it could be used on long trips to the dump. And the dog seemed to like it for drives around town. (In all fairness, I actually have no idea what she did with the truck during that week.) When I saw it, however, a mere five days later, it was a muddy mess, inside and out.

So what does this have to do with M&A?

If there’s a gripe I’m hearing from deal pros recently it’s that transactions are still falling apart. It’s not the credit crunch necessarily that’s putting the kibosh on the closings and it’s not necessarily the cold feet that undid a lot of the large market transactions still being litigated today. Rather, after LOI, it might be a slump in a target’s business or various questions raised throughout the due diligence or even a strategic swooping in to steal a company at the eleventh hour. In speaking with Churchill Financial’s Randy Schwimmer last week, for example, he noted that any one of these occurrences would not be considered an isolated event today.

The annoyance, of course, is that roughly as much work goes into a stalled deal as a transaction that actually closes. So for some dealmakers, that may mean months wasted on a transaction that doesn’t even happen. And what choice do they have, really?

Perhaps it’s a reach, but it reminded me about my truck. For what it’s worth, I cleaned it up again and managed to find a buyer.

Ken MacFadyen
ken.macfadyen@sourcemedia.com