Publications

Six Common Seller Errors in European M&A Deals and How to Avoid Them

Martin Bakker, Partner, MDN Group

In the European M&A market, sellers must deal with an array of regulations, cultural nuances, and shifting market conditions. Even well-prepared owners can encounter unexpected obstacles that slow negotiations, diminish deal value, or cause serious buyers to walk away. By recognizing and addressing these potential pitfalls, sellers can position themselves for a more seamless and successful transaction.

Below are six frequent missteps sellers make during the M&A process, along with practical strategies for preventing them.

1. Underestimating Complexity and Timeframes

First-time sellers often assume that completing an M&A deal will happen swiftly, sometimes imagining closure within a few weeks. In reality, a transaction may require several months, often ranging from six to twenty-four. Regulatory hurdles, buyer confidence, and company complexity all play a role in extending timelines. 

Denis Stukalov, Managing Partner at MDN Group, notes, “A realistic and well-researched timeline not only manages your own expectations but also reassures potential buyers that you have done the groundwork.”

Instead of rushing, sellers should engage in thorough preparation. This includes compiling detailed financials, organizing supplier and customer contracts, and assembling loan agreements. It also involves producing well-prepared marketing documents, such as an Information Memorandum, and dedicating time to buyer research and outreach. Once Letters of Intent and Purchase Agreements enter the picture, negotiations can easily stretch further, especially if advisors or stakeholders lack urgency.

2. Overvaluing the Business

Owners often fall prey to the “endowment effect,” a natural bias leading them to overvalue what they possess. This can deter savvy buyers, including private equity firms and established strategic acquirers, who look for realistic valuations supported by credible data.

To avoid this issue, enlist an experienced advisor to conduct an objective valuation. Professionals can draw upon comparable transaction data, proven methodologies, and market insights, delivering a transparent benchmark that stands up to buyer scrutiny.

3. Sharing Sensitive Information Prematurely

While general company details may not require confidentiality measures in the earliest conversations with buyers, revealing more sensitive information should only occur under a robust Non-Disclosure Agreement (NDA). A well-drafted NDA protects the seller’s confidential data, trade secrets, and client information.

It can also include non-solicitation clauses to prevent a potential buyer from poaching key employees, suppliers, or customers if negotiations end without a completed deal. In practice, highly sensitive data such as proprietary IP details or specific pricing strategies may be withheld until later stages when trust has been established under NDA terms.

4. Signing a Letter of Intent Too Quickly

Sellers who rush into a Letter of Intent (LOI) without first negotiating critical terms sacrifice important leverage. Most LOIs contain exclusivity clauses that stop sellers from seeking or engaging other interested parties during the negotiation period, shifting bargaining power to the buyer.

Before signing, clarify key elements such as payment structures, price adjustments, escrow arrangements, and transaction duration. By establishing these terms upfront, the seller ensures a more balanced negotiation environment and is less likely to be backed into unfavorable concessions as discussions progress.

5. Accepting Unfavorable Terms in the Purchase Agreement

A carefully crafted Purchase Agreement (PA) can protect sellers from unexpected liabilities and complications after the deal closes. Sellers should insist on reasonable escrow holdback terms and, where possible, avoid downward price adjustments tied to working capital or employee retention issues. 

Stefan Hofmann, Business Development Manager at MDN Group, suggests, “A precise, well-negotiated purchase agreement is a powerful shield against misunderstandings and disputes, ensuring that both parties remain satisfied long after the ink has dried.”

The PA should clearly define representations and warranties, including appropriate materiality standards. Sellers should also focus on realistic and transparent performance metrics for any earn-out provisions, preferring criteria less susceptible to manipulation, such as gross revenue over EBITDA. In the European context, clarity and due diligence are essential to minimize misunderstandings and compliance issues.

6. Underestimating the Value of Professional Advisors

Partnering with experienced M&A advisors can significantly improve outcomes for sellers. Advisors, such as corporate finance professionals or specialized brokers, bring insight drawn from recent and historical transaction data. They can guide on realistic valuations, prepare confidential marketing materials, and identify suitable buyers.

“Working with an experienced advisor is not an added expense, it is an investment in peace of mind and a smoother process,” says David Wong, Partner at MDN Group.

Advisors coordinate NDAs, assist in populating data rooms, address buyer due diligence requests, and offer strategic deal structuring that protects the seller’s interests, including managing the complexities of asset versus share sales.

Successfully navigating an M&A deal in Europe requires more than a firm handshake and a willing buyer. By taking the time to understand common pitfalls, secure an objective valuation, protect sensitive information, negotiate fair terms, and involve skilled advisors, sellers stand a much better chance of achieving a successful and profitable outcome. Proper preparation and a mindful approach will help ensure that the M&A journey culminates in a transaction that benefits both parties.