Mergers and acquisitions (M&A) can rapidly transform a business by expanding markets, attracting talent, or increasing competitiveness.
In Northern Ireland, where many transactions involve SMEs and family businesses, the risks are significant and if they’re not properly managed, they can be costly.
Drawing on over 20 years of M&A experience in London and Northern Ireland, Andrew Campbell, Partner at Allsopp Campbell Rainey, outlines common pitfalls and how businesses can avoid them.
1. Skipping proper due diligence
The pitfall: Rushing into a deal without investigating financials, contracts, liabilities, or regulatory issues. Hidden debts or unresolved disputes can turn an exciting acquisition into a liability.
The solution: Carry out thorough due diligence, covering legal, financial, and operational areas. As Andrew notes:
“Buyers often focus on the opportunities and overlook the risks. Sound due diligence provides facts, not just a sales pitch.”
2. Poorly drafted exits in shareholder agreements and articles
The pitfall: When shareholders’ exit rights and obligations are badly thought through and confusing, disputes can derail an M&A process or emerge soon after. Or if a buyer’s flexibility in their offer is curtailed, they can lose interest.
The solution: Ensure agreements are clear and not onerous on a buyer. This avoids costly wrangles over voting rights, profit distributions, or exit strategies, and keeps a buyer from losing hope in the deal.
3. Underestimating cultural and people issues
The pitfall: Assuming staff will simply adapt after a merger. Clashes between management styles, or uncertainty for employees can cause instability and turnover.
The solution: Plan integration early. Communicate promptly and consider incentives such as retention bonuses, equity options, or tailored benefits for key staff. Aligning cultures and offering targeted incentives supports a smoother transition.
4. Overlooking regulatory and compliance requirements
The pitfall: In Northern Ireland, many businesses must follow rules specific to their sector, such as financial services or healthcare. Not getting the right approvals can delay or even cancel a deal.
The solution: Identify regulatory requirements early. Determine which regulators or professional bodies must approve or be informed of the deal and incorporate these steps into your timeline.
5. Misjudging payments, valuation and funding
The pitfall: Buyers paying too much, or paying too soon and not deferring payments correctly, or sellers undervaluing, because of poor valuation models or untested assumptions about growth.
The solution: Engage independent valuers and rigorously test funding arrangements. As Andrew suggests:
“A fair deal means both sides understand the value. While not always easy, clear assumptions can help prevent later disputes.”
6. Not planning for post-deal disputes
The pitfall: Many disputes come up after a deal is completed, often about earn-outs, warranties, or indemnities. Without strong legal agreements, businesses can face years of conflict.
The solution: Anticipate potential disputes at the drafting stage. Clear clauses on warranties, indemnities, and dispute resolution mechanisms save time and cost if issues arise.
Final thought
For SMEs and family businesses in Northern Ireland, M&A can drive growth when managed carefully. Early, practical legal advice helps avoid these common pitfalls.
We combine local insight and decades of corporate law experience to structure deals for long-term success. with our corporate team for expert guidance and a seamless transaction.
Contact Andrew Campbell or the Allsopp Campbell Rainey team today to discuss your M&A needs.