What kills a dealEasy

Five ways a transaction fails to happen, counted across every deal on the site — and the one that decides most of them is not the one people expect.

7 min read · 1 275 words

Every transaction on the deal side of this site carries five bars saying which of five blockers decides whether it completes. This page reads that table the other way round: by blocker, rather than by transaction.

The point of doing so is the counting. Reading one page tells you what stops one kind of deal. Reading all of them together shows that transactions which look nothing alike — a spin-off, a scheme of arrangement, a note programme — fail in exactly the same way, and that some blockers are far more common than the language around deals suggests.

The five, and what each means

Deals do not lose money in a drawdown. They fail to happen, and the reason is nearly always one of these:

• Price — the two sides cannot agree what it is worth.
• Financing — the money is not there, or its cost moved under the deal.
• Approval — a regulator, a court, a board or a shareholder vote says no.
• Diligence — what was found when the buyer actually looked.
• Execution — documents, disclosure, timetable, and the people running it.

The scale is three wide on purpose: decides it, matters, barely applies. A finer one would imply a precision this reading does not have, and it is this publication's own reading — see the standing notice below.

It is not a rating, and there is deliberately no total

A single score would be a rating, a rating invites a ranking, and a ranking of transaction types by how likely they are to fail is the shape of a recommendation about which one to do. What is recorded is which failure mode decides, which is descriptive rather than evaluative. A rights issue and a hostile takeover can both be marked "approval decides it" and nobody would conclude they are equally difficult.

The same argument, applied to instruments rather than to transactions, is on which risk decides — and reading the two together is the fastest way to see how the two halves of this site are built the same way.

Every transaction, sorted by what decides it

Three things the counts say

Execution is not a footnote

The word sounds like administration — documents, disclosure, timetables — and it decides more transactions on this site than price does. A scheme that draws its classes wrongly starts again. A note programme whose accounts have gone stale cannot issue at all, however good the market is. An overnight placing lives or dies on managing an insider window measured in hours.

None of those is a market event. All of them stop a transaction completely.

Financing decides where the transaction is a financing

It is the least common of the five, and where it does decide, it decides completely. On the leveraged finance desk, what lenders will lend sets what a buyer can pay — so a bid falls when the debt market moves and nothing about the business has changed. In structured finance the deal has no purpose other than raising money. And in restructuring it is the new money that is scarce, which is why whoever provides it usually sets the terms.

What is more interesting is where it is absent. On most of the advisory and analytical transactions — a demerger, a scheme, a fairness opinion — financing barely applies at all. Which is a useful corrective to the habit of describing every difficult market as a financing problem.

Approval is the one nobody in the room can negotiate away

Price is negotiable. Financing can be re-sourced. Diligence findings can be indemnified. But a competition authority, a court or a shareholder vote is a decision taken by people with no interest in the timetable, and the only response available is to wait — which is why the gap between an offer price and the market price exists at all, and why it is readable every day.

How to use this

Take any transaction you are reading about and ask which of the five is doing the work. It sorts the noise quickly: a deal reported as collapsing "because of market conditions" was blocked by financing or by price, and those are different stories with different consequences for whoever wanted it.

And it travels between the two halves of the site. An instrument's risk profile says how a position loses money once it exists; this says why it might never exist. A high-yield bond has both, and they are answering different questions about the same piece of paper.