Most M&A deals don’t collapse in one dramatic moment. They leak value at a dozen small decision points between the first conversation and the wire transfer, and at a few more after it.
I’ve spent more than a decade on mid-market and venture-backed deals, buy-side and sell-side. When I map where those deals go wrong, the same pitfalls come up again and again. Some sound obvious until you see how they actually play out; others are quietly devastating, and founders only discover them years after closing.
Four stages, twenty-eight pitfalls
I break every deal into four stages, and each has its own way of going wrong.
Pre-LOI: Everything before you sign the letter of intent. Nine pitfalls live here, and this is where you have the most leverage and the cheapest fixes: valuation gaps, process, the cap table, investor alignment, deal structure, QSBS, trade secrets, credibility and the LOI itself.
Diligence and documents: Nine more. This is where momentum either compounds or bleeds out into a thousand small fights over indemnification, R&W insurance, walk rights, disclosure schedules, regulatory clearance, equity treatment and customer concentration.
Post-signing: Three pitfalls in the gap between signing and closing: operating covenants, third-party consents and the wait for regulatory approval. The deal is signed, but it can still die.
Post-closing: Seven more after the wire clears. Earnouts, rollover, the working capital true-up, indemnity claims, tax and the stockholder representative all play out exactly as the contract was written.
Six imperatives
If you remember nothing else, remember these six. They separate the deals that close cleanly from the ones that bleed value between the LOI and the wire.
Model the waterfall before you negotiate the term sheet: Know exactly what each dollar of headline price returns to founders, employees and rollover holders. The headline number reaches founders only after every preference, SAFE, option and pool above them is satisfied.
Define working capital at the LOI: Agree on the formula, the reference period and the dispute mechanism before you sign. Leave it until closing and the buyer holds the leverage; leave it until after closing and the buyer also holds the books.
Run a clean team: Stage your diligence. Put trade secrets and source code in a clean room reviewed by outside consultants, and define what’s confidential before it ever leaves the building. If a buyer walks away with your information, litigation is a slow and uncertain way to get it back.
Disclose early and disclose hard: Surface bad news before the LOI, while you still have leverage. Buyers price uncertainty, so every late surprise becomes a price cut, a tighter indemnity or a buyer who quietly walks.
Centralize communications: One spokesperson and one channel for buyer questions. Between signing and closing, run the company as if the deal can still die, because it can.
Negotiate the day after, today: Earnout discretion, rollover vesting and non-compete scope decide whether you keep the value you negotiated. You set them at signing and live with them for years.
Every stage matters
The deals that close cleanly are the ones where every stage gets treated as if it were the most important one. Honestly, every stage usually is.
The rest of this series takes the pitfalls one at a time, with the market data behind each and what I’d do about it.
Ahmed Hasan is the founder and CEO of Venture Bridge Law, a corporate and M&A boutique. This article is general information, not legal advice.