5 Expert Insights

Deal fever is a difficult ailment to cure. It is also very easy to mess up a good deal with bad integration decisions after the deal is done. Everything looks so rosy before it happens.

There are a few different ways to communicate unpleasant news to management in such a case. Your communication options depends on the preferred style of your organization's management presentations and the type of presenter you are.

If the news is all numerical, you have the waterfall chart option that shows the good news items stair-casing up on the chart for each individual advantage of the deal. Then you have the numerical down-stair-casing for each bit of negative impact you can show on the chart. The final waterfall (aka cascade chart) will then show what the net gain or loss of the deal is.

You could also do a simple qualitative and / or quantitative benefits and risk assessment presentation to show a balanced picture of the deal. That story could be supplemented by the ROI analysis, which in your story could be negative if I understand your concerns correctly. I guess you could also say that you have some late findings as part of the due diligence process that needs to be discussed.

Those are just some suggestions I have based on the sparse information you have shared with us.
Hope that helps a little.

I support David's advice. I would like to point out a people issue.

My suggestion is that you clearly present the pros and cons, substantiate your claims AND be politely firm with your recommendation. Remember, if the deal does go through and fails, finger pointing will start.

An alternative way to present your findings is in a "Risk mitigation strategy" in which you propose what would need to be done to close the gaps you found.   That is, add your voice to how the deal could work and what further investment would be necessary to overcome the gaps.  

From a servant leadership perspective consider going directly and privately to the M&A team and provide your observations and recommendations.  Let them present these details and cover themselves.  Be your brother's keeper.  Let them present your findings and risk mitigation strategies to senior management and support their findings in the meeting.

Thoughts?

Before you communicate anything to anyone, you need to determine what you want out of the deal. It's possible that they might shoot the messenger, namely you. "I told you so" doesn't serve your career. Think strategically. Take care of yourself. These situations, particularly late stage,  can be political.

Contact me if you want to talk.

All deals start off based on assumptions which some times don't survive reality. If you have empirical information that contradicts those working hypotheses you initially made then by all means speak up!

Just to let you know my own experience in this area,  some colleagues of mine worked for months on a deal (c. $500MM) and were close to signing when someone asked me to sit in on the meeting. To this day, I can't remember who! Very annoying. Anyway.... We must have been 25 people - buyer, seller, bankers, lawyers, advisors,... - with only a few talking for all of 5 hours. You know the kind of meeting, I'm sure. Just before we were going to break the lead negotiators on both sides speak up and say, "Okay. We agree on $500MM and we are moving forward with deal." At that point, realizing how screwed up the numbers were I couldn't shut up any longer. So I spoke up and very calmly explained how the assumptions underpinning the valuation were completely questionable and there was no way we would ever pay that amount for the company. That was it. The deal was dead in the water. As a result, we had to write-off $750MM of previous purchases that had been done by my predecessor and 3,000 people lost their jobs that day. I am certainly not proud of putting so many people out of work but I was angered - and still am - by the incompetence of those who did the crappy job that put all those people and their families in harm's way! This incident motivated me to leave the world of big business.

For goodness sake, speak up when you know its bad deal. If you understand why its bad - what everyone else isn't seeing - you can say it simply, and everyone will open their eyes. They will have an "ah ha" moment and make the best decision.