on this sale process; but they needed a buyer within a limited timeframe and would look elsewhere if this process faltered.
Management did
occasionally grant small amounts of extra time on their interim deadlines during the process, but as they had established that they did have credible alternatives they could do this without undermining their overall position.
Conclusion
It will usually be the company, rather than the investor or buyer, that has a pressing need to complete a transaction by a certain date – and this leads to negotiation pressure, which can significantly affect the terms that are achieved in that deal. Beginning the process early, so as to allow time for the deal to proceed without getting too close to that real deadline, is the
easiest and most common way of combating this.
Deal deadlines may be used effectively if the company believes
that it has reasonable alternatives to the transaction and that the other party is relatively committed to the deal. If they intend to add this particular cog to their machine, management must ensure that their deadline is feasible and convincing – and, crucially, must be prepared to take action if it is not respected.
David Willbe is a lawyer in the Corporate Group in the London office of Crowell & Moring, an international law firm (@CrowellLonCorp)
Next month’s article will look at the use of termsheets in deals.
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