NAPL member-clients have heard this advice many times: plan your M&A announcement around the closing as opposed to the letter of intent, unless there are exigent circumstances.
The reasoning behind this philosophy is simple: the owner of the company who is selling his or her business loses all negotiating ability because they can not easily back out of an announced deal. That is why the big company acquirers like to announce "upon letter of intent" as opposed to waiting until the actual closing.
You know all those details that need to be ironed out between Letter of Intent and Closing? Those details are critical and yet they are hard to negotiate if you, as the seller, lose the ultimate negotiating tool: backing away.
So, normally, we prefer to work on communications between letter of intent (or Term Sheet) and closing. BUT, sometimes, probably in less than half the cases, something comes up that results in the need to announce the transaction before all the details are set in stone.
One such example came up this week: Bordeaux Printers merges into L+L Printers (www.napl.org and click on the link from home page to read the full press release).
This case was one in which "something" came up that, in my opinion, which was concurred with by the principals of both companies, required an announcement prior to an actual closing: confidential e mails were allegedly read inappropriately by a person with access to the e mail server at Bordeaux. We were concerned that this could result in "leaks" leading to rumor, misinformation, and unintended consequences. We decided to mitigate this risk by getting out the word properly and promptly, ahead of potential PR missteps.
The lesson learned: owners need to take steps to shore up security around sensitive e mail communications when engaged in M&A talks. One proven tactic is to use personal e mail accounts set up on Yahoo, Hotmail, or Gmail.
If you have questions about WHEN and HOW to announce M&A transactions, please do not hesitate to contact me, as we have lots of communication examples, expertise, and templates for everything from employee announcements to customer notification to supplier letters.
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