Deal-breakers are crucial factors or conditions that can prevent a negotiation, partnership or investment from going ahead. If these critical points are not accepted or met by one of the parties involved, the deal will fall through, regardless of the outcome of all other negotiations.
Deal-breakers occur particularly frequently in funding rounds, company sales, partnerships or contract negotiations.
Typical deal-breakers might include:
- Disagreement over the valuation of the company
- Unfavourable terms of shareholding or contracts
- Unclear ownership or legal relationships
- Lack of market or growth prospects
- Doubts about the founding team or the business model
- Lack of transparency during the due diligence process
Identifying potential deal-breakers at an early stage helps with this:
- Making negotiations more efficient
- to avoid unrealistic expectations
- Identifying risks at an early stage
- Building trust between the parties
- to increase the chances of a successful outcome
It is particularly important for start-ups to identify potential deal-breakers before entering into discussions with investors or partners, and to address them proactively. Thorough preparation creates transparency and can prevent negotiations from breaking down at the eleventh hour.
innoWerft helps founders prepare professionally for funding and partnership discussions, identify potential weaknesses at an early stage, and structure negotiations in such a way that any potential deal-breakers can be identified and resolved in good time.