PART OF THE SALES AND INVESTMENTS IN SLOVAK COMPANIES FAIL IN THE PROCESS.

A PART OF SALES AND INVESTMENT IN SLOVAK COMPANIES FAILS IN PROCESS. I have been doing my internal statistics. We at Highgate Law & Tax have worked on 47 transactions in the last 5 years. Of these: ✅ 18 were “traditional” M&A, of which we represented the buyers’ side in 12 and the sellers’ side in 6;
✅ 20 were venture capital investments (both equity and convertible loan), of which we represented the investor side in 13 and the founders and target in 7; and
✅ 9 were private equity-type investments, of which we represented the investor side in 6 and the target company side in 3. All of these transactions reached the closing stage, i.e. were successfully completed. However, in my 15 years of experience, I have also recorded a number of cases where a transaction failed in the process. However, more accurate statistics in this regard would be quite misleading, as a number of failed sales and investments do not even reach us as legal and tax advisors (in most cases, we are only called to the table at or just before the signing of the term sheet/LOI, when the basic terms have already been agreed between the parties). However, from conversations, market knowledge and experience, I would identify the following as the 3 most common causes of transaction failure: 📌 buyer and seller not agreeing on the purchase price/valuation of the company 💰;
📌 failure to agree on another key commercial transaction term (e.g. the ratio between the portion of the purchase price payable at closing and the portion payable as an earn-out) 📈;
📌 Seller’s unpreparedness for the sale process (in practice, for example, lengthy and incomplete due diligence documentation leading to the closing of the transaction, or worse, for example, large “skeletons” in the books) 💣. While the first two reasons are more of a commercial nature, the existence of the third one can be limited to a large extent, or even eliminated altogether, by the guidance of good transactional and legal advisors. I also talked to Miroslav Talian, FCCA, Head of Transaction Advisory at KPMG in Slovakia, about the specific process of selling a company on the Slovak market and how to prepare for the sale of a company. And not to forget – in March 2025 we are organizing a unique conference on sales and investments in Slovak companies. More information and a website for the conference will be available soon at www.highgate.sk. Podcast available here – https://lnkd.in/eAtk3gEh