Curious if anyone has walked away from a deal just based on gut feeling? We have some small reasons we are uncovering during DD but it doesn’t seem like enough to really say no. I just don’t have a great feeling…
I think it depends on what category those “small reasons” fall into. If it is cultural differences or attachment to specific ways of working, and the goal is to completely integrate them into the parent company, those could be dealbreakers. If it is lack of maturity, process, or systems, then I think these are much more easy to overcome through a well thought out and prescriptive integration plan. Although gut feeling should be noted, hopefully your DD process has a framework to identify how those feelings can be noted quantitatively. For example, if company culture prevents full integration, how does that translate into opportunity cost, and would it then be considered a failure against your KPIs for success? Hopefully that helps you steer your feelings, which are probably valid, into facts that can be used for decision making.
I’d say listening to your gut is a good start to pulling the M&A team together and comparing notes. If it seems like something is off then it is likely something is. Better to pull the team together and review your notes just to be sure.
There have certainly been times we have slowed the pace of a deal due to a gut feeling, but as an advisor, we always have to provide a tangible explanation to client. Generally, the gut feeling for me has arisen out of one party being unresponsive or acting standoffish to requests for information.
I would always prefer a well defined reason for walking away. This may require additional team collaboration to truly understand what is amiss. A number of small reasons may point to something more serious.
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