Very few health-care transactions, relatively speaking, fail to go to closing, but there are some common themes for those that don’t come to fruition.
Three attorneys who spend most of their time counseling health-care clients on the ins-and-outs of dealmaking told me the biggest reason some transactions fail is time. A client’s excitement about merging or combining with another entity may wane the longer it takes to do the deal, Randal L. Schultz, of Lathrop & Gage LLP, Overland Park, Kan.; Douglas B. Swill, of Drinker Biddle & Reath LLP in Chicago; and Paul A. Gomez, of Polsinelli PC in Los Angeles, told me.
Given enough time, a party may start looking around for “a more attractive partner,” Schultz said. Long delays by one party can lead the other to question its commitment to the transaction or the resulting entity, Gomez added.
Deals also can get bogged down during the due diligence phase, as the parties are getting to know one another and potential liabilities relevant to the deal are disclosed or uncovered, the attorneys said. Surprises can arise, such as finding out the potential partner is facing a government investigation or newly filed litigation.
Delays in required government approvals also occur, and sometimes the government’s refusal to grant approval or placement of conditions on the combination swamp a deal, the attorneys told me.
Although it’s “highly unusual,” deals occasionally fall apart at the “11th and a half” hour, Swill said. This occurs when parties discover they don’t quite mesh and fail to find a way to integrate operations that’s agreeable to everyone.
In short, there are many and varied reasons deals fail to close, and wise transactions counsel will anticipate and plan for them, the attorneys told me.
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