New York, NY business attorney Richard S. Green discusses common mistakes businesses make in mergers and acquisitions. One of the most common mistakes clients make is falling victim to “deal fever.” They become so caught up in the excitement and adrenaline of the transaction that they lose sight of the associated risks. This over-optimism often leads them to take on risks they may not fully comprehend due to their heightened emotional state.

A typical scenario illustrating this is with earnouts, where a seller agrees to sell the business and receive payment over time from the buyer. The seller usually assumes there will be no problem in meeting the earnout targets, expecting the process to go smoothly. However, disagreements may arise later about the direction of the business, leading to a strained relationship. When it becomes apparent that the earnout may not be fulfilled as expected, the seller often feels disappointed and may seek legal assistance to recover the anticipated payments, resulting in disputes.

Another common issue in mergers and acquisitions is clients’ frustration with their lawyers. They may view the lawyers as “deal killers” because the lawyers highlight potential risks that the clients need to understand. While clients are typically eager to close the transaction, competent lawyers strive to ensure that the deal is legally sound and that clients are fully aware of the risks they are assuming. The ultimate goal is to secure a successful transaction that reduces the likelihood of future disputes and disappointment.