New York, NY business attorney Richard S. Green discusses common mistakes businesses make in mergers and acquisitions. He observes that one of the most common mistakes clients make is succumbing to “deal fever.” Enthralled by the excitement and momentum of a transaction, clients can lose sight of the associated risks. This over-optimism often leads them to take on exposures they may not fully appreciate, driven by the heightened emotional state of the moment.

He cites earnouts as a typical example. In such arrangements, a seller agrees to sell a business and receive payments over time from the buyer. Sellers often assume that meeting the earnout targets will be straightforward, expecting a smooth process. However, disputes can later arise regarding the business’s direction, straining the relationship. When it becomes apparent that the expected earnout may not be realized, sellers often turn to their lawyers seeking ways to recover the anticipated payments.

He also notes that clients frequently become frustrated with their lawyers during mergers and acquisitions. Lawyers may be perceived as “deal killers” for highlighting potential risks, even as clients are eager to close the transaction quickly. Yet, a competent lawyer’s role is to ensure the deal is legally sound and that clients fully understand the risks they assume. The ultimate objective is to guide clients toward a successful transaction while minimizing disputes and disappointments in the future.