Chapter 49Where the Deal Could Still Blow Up

One significant risk involves regulatory approvals. Certain deals, particularly those involving large corporations, dominant market players, or specific industries such as telecommunications, technology, pharmaceuticals, and defense, typically trigger rigorous antitrust inquiries and regulatory reviews. These approvals can come from agencies such as the Federal Trade Commission (FTC) or the Department of Justice (DOJ) in the United States, the European Commission in Europe, or other jurisdictional regulatory bodies globally.

Transactions that significantly reduce competition, create monopolistic or near-monopolistic entities, or have major market share implications often attract intense scrutiny. In the U.S., the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act) mandates filing with the FTC and DOJ if the transaction exceeds certain monetary thresholds, which are adjusted annually and currently exceed approximately $126.4 million (as of 2025). Furthermore, if the acquiring or acquired parties meet certain size-of-party thresholds, the deal is subject to mandatory reporting and approval. High-profile examples include Microsoft's acquisition attempts of Activision Blizzard and Adobe's proposed acquisition of Figma, both subject to extensive antitrust challenges. Regulatory approvals can take months or even years, and prolonged uncertainty can ultimately kill the deal. Check with your lawyers if these cases apply.

When selling to a foreign company, particularly from countries like China, additional regulatory hurdles come into play. In the U.S., this involves a review by the Committee on Foreign Investment in the United States (CFIUS), which evaluates potential national security risks. Similarly, other jurisdictions may require approvals related to foreign ownership or investment restrictions. Such processes can be unpredictable, politically influenced, and significantly extend deal timelines or even lead to outright denial.

Third-party consents, such as approvals from key business partners, licensors, lessors, banks, or major customers, represent another hurdle. Even minor resistance or delays from these critical stakeholders can halt or derail the entire transaction. Additionally, the transfer of crucial assets—intellectual property, real estate, or licenses—can encounter unexpected legal or bureaucratic obstacles. While the seller can prepare thoroughly by maintaining clear contractual language and proactively securing third-party buy-in, some situations remain inherently unpredictable.

A couple examples of this could be the notice and approval of the sale from a platform that you do your business on, say Apple or Google if you develop apps, or Roblox if you are a game developer on top of their platform. There could also be the issue where your key customers have languages in the contracts that require notices or approvals when there is a change of ownership or any type of liquidation event.

Another substantial risk factor is the financial stability and business performance of both parties leading up to closing. If the acquiring company experiences a particularly poor financial quarter, encounters a sharp decline in stock value (especially relevant if the deal includes stock-based consideration), or uncovers previously undisclosed material financial issues within the target company, the buyer may reconsider and withdraw.

A badly missed revenue target by the seller, the emergence of significant liabilities or legal challenges, or revelations of unethical or problematic business practices—often uncovered in the final stages—can likewise derail the deal.

Sometimes the human element can also disrupt what might appear to be a solidified transaction. Misalignments, disagreements, or unexpected emotional decisions from either party's leadership, uncovered during final deliberations, can introduce doubt or erode trust sufficiently to terminate negotiations. There have indeed been instances where hastily signed term sheets, concluded without adequate reflection or diligence, unravel completely as the parties sit down to finalize the definitive agreement.

In this precarious phase, diligence, responsiveness, and careful timing become critical. Any unnecessary delay or lack of responsiveness can cast doubt and lead the buyer to question the seller's commitment or the veracity of earlier disclosures. You as the seller must promptly address all inquiries, clearly communicate any arising issues, and remain consistently engaged until the transaction fully closes.

Given the complexity and myriad potential pitfalls of the deal-closing process, substantial deliberation before signing the term sheet is crucial. Both parties should fully understand their commitments, responsibilities, and mutual expectations. Hastily executed agreements, driven by impulse or superficial alignment, often lead to significant disruptions later. The definitive agreement stage is far too late to uncover fundamental misunderstandings that could ultimately lead to the collapse of the transaction.

In summary, although substantial progress is marked by the definitive agreement, the consummation phase remains fraught with potential hazards. You should remain vigilant, responsive, and proactive, carefully controlling what they can while calmly managing and preparing contingencies for what they cannot.