M&A Is Hard When the Seller's Business Falls Off a Cliff

This post originally appeared in Money Stuff.

When one company wants to acquire another company, their chief executive officers get together with bankers and lawyers and negotiate a deal, and then they present the deal to their boards, and if the boards approve then they sit down and sign a merger agreement and put out a press release saying that they’re merging. But you can’t just merge like that. For one thing, the target’s shareholders need to vote to approve the merger, which means that you have to write and mail them a proxy statement and then hold a meeting. For another thing, you usually need regulatory approvals to actually merge—at least from antitrust regulators, and often from industry-specific ones. The acquirer might also need time to raise financing (for a cash deal), or get approval from its own shareholders (for a stock deal). So after the merger agreement is signed, it is a matter of months, sometimes over a year, before the merger can close.