The Upside – How to Avoid Deal Fatigue

Middle market deals are very different than large transactions on Wall Street. They are significantly smaller and highly personalized, compared to mega deals.

There is an emotional component to small deals that can play an outsized role in their outcome. They take longer, due to the need to organize and prepare financial reports for the lender diligence process.

There is just as much work involved in a small deal as a large deal, yet there are less hands on deck to accomplish the task. While lenders seek out companies with efficient systems and world class processes to make loans to, their own diligence efficiency can leave a lot to be desired.

Most lenders simply do not get how onerous their diligence process can be with a prospective borrower. The disequilibrium between lender requests and prospect reporting capability results in extended deal times, even when both parties wish to move at the speed of light.

Frustration levels rise, resulting in impatience and negative feelings leading to doubts about the certainty of close. This happens at the time when the lender is trying to learn about the inner workings of the business, to have a workable understanding of the company and its business drivers.

Ultimately, lenders want to make the loan but need to run through their process. The extra time to complete the deal saps energy, causing edginess and a level of deal fatigue.

As the saying goes, time kills deal. All deal teams should be mindful of the pernicious effect deal fatigue can have and have a game plan to combat it. Here are four tips that will help you manage through this omnipresent state:

1. Build personal connection – when you have a real relationship with the other party, as opposed to a virtual connection, you can have a better read on where they are in the process. The stronger the connection, the more likely you will both have trust and be able to work through any tough points.
2. Have constant communication – Lenders need to constantly communicate where they are in the process and where they are going. Borrower’s need to reciprocate and be completely candid about their ability to respond to the lender’s requests. If more than a few days go by without a call, you should pick up the phone and check in.
3. Build Credibility as a Straight Shooter – people want honesty and transparency in their business partners. No one wants to do business with someone they don’t like or can’t trust. Be direct and straightforward and let them know you are doing your best for them.
4. Set Realistic Deadlines – map out a real timeline, not a pie in the sky one. Understand that there are about 1,000 things that have to fall in place perfectly to reach the desired timeline. The more unrealistic the timeline, the more unnecessary pressure you are creating.
5. Set Realistic Deadlines – map out a real timeline, not a pie in the sky one. Understand that there are about 1,000 things that have to fall in place perfectly to reach the desired timeline. The more unrealistic the timeline, the more unnecessary pressure you are creating.