The Deal-Killers: Legal Issues That Derail M&A Transactions

In Mergers and Acquisitions, maintaining momentum is essential. When a deal is moving, both parties are motivated to reach the finish line. However, nothing kills a deal faster than an unexpected legal hurdle.

At Stock Legal, we’ve seen where the “landmines” are buried. Often, these delays don't happen because the business itself is bad, but because the legal groundwork wasn't properly laid. Here are some common legal issues that delay or derail M&A transactions -- and how to avoid them.

The Vague Letter of Intent (LOI)

The LOI is the foundation of your deal. A common mistake is rushing through this stage to get to the “real” work. If the LOI is vague regarding the deal structure, indemnification, payment structure or other key terms, you are essentially inviting “re-trading” later on. When terms must be renegotiated mid-stream, trust erodes and timelines stretch.

Disorganized Due Diligence

Once a buyer has exclusivity, the clock is ticking. If a seller is scrambling to find old contracts, intellectual property assignments, or corporate minutes, the buyer begins to wonder what else is missing.

Prepare your virtual data room before you even sign the LOI. Being organized signals to the buyer that the company is well-run and reduces the risk of “deal fatigue” during the process.

Missing Third-Party Consents

Your contracts with landlords, vendors, and customers often contain “change of control” or “assignment” clauses. If you need a third party’s permission to close the deal, you are at the mercy of their timeline. If a major landlord or key supplier refuses to sign off, it can derail the entire transaction.  This should be one of the first issues to be addressed during the process.

Intellectual Property (IP) Ownership Gaps

For many companies, the value lies in the IP. A common deal-killer is discovering that an outside contractor or a former employee never signed a intellectual property assignment agreement. If the seller doesn't clearly own the code, the brand, or the patent, a buyer could walk away or significantly slash the purchase price.

Compliance and Regulatory “Surprises”

Unexpected issues with sales tax nexus (not paying taxes in states where you have a presence) or labor law violations (misclassifying employees as independent contractors) are major red flags. These issues create “tail risk” that buyers are often unwilling to inherit.

How to Keep Your Deal on Track

The best way to prevent these issues is to engage legal counsel early. At Stock Legal, we believe that legal involvement shouldn't start at the closing table; it should start long before the LOI is signed. Our proactive approach ensures that your contracts are in order, your IP is protected, and your “house is clean” before a buyer ever steps through the door.

If you’re considering a sale or an acquisition, don’t wait for the due diligence phase to find out if your deal is at risk.

Contact Stock Legal today to schedule a consultation and let us help you navigate the complexities of your next M&A transaction.