February 1, 2024

M&A Process: Preparing for Deal Leaks

I remember vividly working on a large public company acquisition that was approaching signing. The targeted signing date was about 3-4 days away, and the parties had made elaborate plans to roll news of the deal out to the media, analysts, investors and employees.  Unfortunately, at about 5 pm that afternoon, the buyer’s CEO received a call from The Wall Street Journal asking for comment on a story that they were about to run disclosing that the parties were close to a deal.

That triggered an all-night effort to get everything buttoned up in order to allow for a signing and announcement the following day. Even though we were close to the finish line, the process still couldn’t have been more disrupted if somebody had lobbed a hand grenade into a room full of the documents that needed to be signed. That’s one of the reasons why I thought this excerpt from H/Advisors Abernathy’s recent report on M&A deal leaks addressing the need to prepare for the possibility of a leak was worth sharing:

While a rumored transaction can leak at any time, the likelihood grows as negotiations and due diligence progress and more parties are brought under the tent, from external advisors and financial backers to internal teams. This widening circle is inevitable as the path to signing and announcement moves further along, but rumors can begin to swirl even in the early “talks” phase, so it’s critical to plan for a potential leak well in advance of due diligence and announcement day.

Both parties should be aligned on how they plan to respond to potential leaks of all kinds, which could range from a speculative inquiry from a reporter with very little information to outreach from a reporter with most of the facts and enough concrete information to publish a story with or without your response.

Leak preparation should consider these different scenarios and how to prepare for and respond to each one in real-time – with draft materials for use in communicating with key stakeholders if rumors do become public and you need to address internal and external chatter.

Map out stakeholder groups and recognize that a leak may impact them in different ways and prompt different questions – shareholders may drill down on valuation and rationale, while employees are more likely to be concerned about job security, and customers about service disruption. Prepare messaging, create a rapid response plan, and, again, make sure both parties are aligned about what should and should not be said to internal and external audiences.

The report offers a lot of other information on leak-related topics, including data on how frequently information about deals leaks, how accurate leaked information is, what industries are the “leakiest”, the extent to which deal size is a factor in determining whether a leak is likely, and the role social media plays in leaking deal-related information.

John Jenkins