Show Stopper

It is an issue or obstacle important enough to stop or delay a financial transaction or investment. 

Author: Patrick Curtis
Patrick Curtis
Patrick Curtis
Private Equity | Investment Banking

Prior to becoming our CEO & Founder at Wall Street Oasis, Patrick spent three years as a Private Equity Associate for Tailwind Capital in New York and two years as an Investment Banking Analyst at Rothschild.

Patrick has an MBA in Entrepreneurial Management from The Wharton School and a BA in Economics from Williams College.

Reviewed By: Hassan Saab
Hassan Saab
Hassan Saab
Investment Banking | Corporate Finance

Prior to becoming a Founder for Curiocity, Hassan worked for Houlihan Lokey as an Investment Banking Analyst focusing on sellside and buyside M&A, restructurings, financings and strategic advisory engagements across industry groups.

Hassan holds a BS from the University of Pennsylvania in Economics.

Last Updated:February 4, 2024

What is a Show Stopper?

In finance, a show stopper is an issue or obstacle significant enough to halt or delay a financial transaction or investment. 

These situations can arise for various reasons, such as 

  • Regulatory hurdles, 

  • Legal disputes, or 

  • Unforeseen market conditions. 

Sometimes, additional negotiation or discussion can help overcome this situation. In contrast, in other cases, it may be a deal breaker that prevents the transaction from proceeding. 

These are important considerations for investors and financiers, as they can impact a financial venture's feasibility and potential success.

Some key features include the following:

  • These can arise for various reasons, such as regulatory hurdles, legal disputes, or unforeseen market conditions.

  • These can impact the feasibility and potential success of a financial transaction or investment.

  • These can be overcome through additional negotiation or discussion, or they may be deal breakers preventing the transaction.

  • These must be carefully evaluated and managed to ensure the success of a financial venture.

  • These can pose significant challenges and obstacles to financial transactions and investments.

Key Takeaways

  • Show stoppers can be significant events or factors that have the potential to affect the failure or success of a financial deal or investment.
  • It is important to identify potential stoppers early on and assess their potential impact on the success of a financial deal or investment.
  • Thorough due diligence is essential in identifying and mitigating potential show stoppers.
  • Being flexible and adaptable is key when dealing with these stoppers, as unexpected changes in economic conditions, regulatory hurdles, and other factors can arise at any time.
  • Having contingency plans in place can help to address potential stoppers and minimize their impact on the success of a financial deal or investment.

Show Stopper In Mergers and Acquisition

In the context of mergers and acquisitions (M&A), a show stopper can arise for various reasons, and it can impact the feasibility and potential success of the transaction. 

Some potential ways such situations could work in the context of M&A include the following:

Regulatory Hurdles

In some cases, M&A transactions may be subject to regulatory approval, and the lack of approval could be a stopper. 

Example

If the transaction would result in significant market consolidation, the regulatory agency may need to review the transaction to ensure it does not violate antitrust laws.

Legal Challenges

M&A transactions may be challenged in court, which could be a stopper. 

Example

The target company may argue that the transaction is not in the best interests of its shareholders or that the buyer needs to offer a fair price.

Opposition From Shareholders

If a significant number of the target company's shareholders oppose the M&A transaction, this could be a stopper. 

Example

The shareholders may argue that the transaction is not in the best interests of the company and vote against the transaction.

Financing Difficulties

If the buyer cannot secure the financing for the M&A transaction, this could be a stopper.

Example

If the buyer is unable to obtain the necessary financing from banks or other lenders, the transaction may not be able to proceed.

Overall, show-stoppers can pose significant challenges and obstacles in M&A transactions. Therefore, they must be carefully evaluated and managed to ensure the transaction's success.

How to Overcome Show Stoppers?

There are several ways to overcome this situation in finance, depending on the specific nature of the show stopper and the financial transaction or investment goals. 

Some potential approaches to overcoming these stoppers include the following.

Engage In Additional Negotiation Or Discussion

This situation can sometimes be overcome through additional negotiation or discussion with the relevant parties. 

Example

If a regulatory hurdle is causing a show stopper, the company may need to engage in further discussions with the regulatory agency to obtain the necessary approval.

Adjust The Financial Transaction Or Investment 

Another approach to overcome this situation is to adjust the financial transaction or investment to address the stopper. 

Example

If a legal dispute is causing a stopper, the company may need to negotiate a settlement or resolution of the dispute to proceed with the transaction.

Explore Alternative Solutions

In some cases, it may be necessary to explore alternative solutions to overcome this situation. 

Example

Suppose market conditions are causing a show-stopper. In that case, the company may need to consider alternative fundraising strategies, such as seeking funding from other sources or delaying the transaction until market conditions improve.

Seek Expert Advice

These situations can be complex and challenging, and it may be helpful to seek expert advice to overcome them. 

Example

A company may benefit from consulting with legal or financial advisors who can provide guidance and support in navigating the stopper situation.

Overall, overcoming a show stopper in finance requires a careful and strategic approach that considers the specific circumstances and goals of the financial transaction or investment. 

By considering a range of potential solutions and seeking expert advice as needed, companies can often find ways to overcome stoppers and move forward with their financial ventures.

Examples Of Show Stoppers

We can understand the concept in a better way if we take a look at some of the examples.

Example 1

If a company is seeking funding for a new product or service, a show stopper could need more regulatory approval for that product or service. 

This could prevent the company from launching the product, making it difficult to generate revenue and repay its investors.

Example 2

One example of a show stopper in finance occurred in 2008 when the global financial crisis hit. Several factors, including the housing market collapse and the failure of major financial institutions, caused this crisis. 

The crisis significantly impacted the global economy and led to the failure of many financial deals and investments. 

In this case, the stopper was the unexpected and sudden change in economic conditions, which significantly impacted the success of many financial deals and investments.

Example 3

Market conditions can also be a show-stopper in finance. For example, if a company is seeking to raise capital through the sale of securities, but the market is experiencing a downturn, this could make it difficult for the company to obtain the desired level of funding. 

In this case, the company may need to adjust its fundraising strategy or consider other alternatives, such as seeking funding from other sources or delaying the transaction until market conditions improve.

Overall, show stoppers are an important factor to consider in finance. They can pose significant challenges and obstacles to financial transactions and investments and, therefore, must be carefully evaluated and managed to ensure the venture's success.

Researched & Authored by Ankit Sinha | LinkedIn

Reviewed and edited by Parul GuptaLinkedIn

Free Resources

To continue learning and advancing your career, check out these additional helpful WSO resources: