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Since both sides bear their costs until the final contracts are signed, how do you prevent an insincere large competitor from offering a term sheet, doing due d
by ajju 15y ago
Since both sides bear their costs until the final contracts are signed, how do you prevent an insincere large competitor from offering a term sheet, doing due diligence to learn everything they can about the business, and then backing off based on a contrived revelation?
If NDA you mentioned is the only thing preventing them from doing this, it seems a bit iffy.
- swombat 15y agoI'm not an expert, but I believe that the term sheet for M&A normally includes breakage clauses, so that the acquirer has to pay the target a breakage fee if they pull out of the deal without a really good and previously agreed reason. If you don't have such a document in place, you should probably not agree to a DD. DD happens after everything is negotiated, as a final formality, not as a precursor to getting everything agreed.