PRIMARY ROADBLOCKS TO A BUSINESS SALE
Why do most sale mandates under contract with a business broker or investment banker fail? Only about one-third (33%) of signed agreements result in a successful sale.
We offer these basic reasons for the poor track record:
- The broker or banker overpromised and underdelivered. The seller was “sold” on an inflated enterprise value and a way too short time frame for a completed transaction.
- As part of the pre-sale and exit planning period, the professionals enlisted did not provide the needed level of competence.
- Due diligence by the broker or banker’s team failed to uncover the significant problems, such as income and sales tax liabilities, shrinking margins, customer concentration, lack of financial systems, pending lawsuits, etc.
- The broker a buyer simply did not match the appropriate buyers with the seller.
- Buying entities did not have the dry powder required to close without additional funding or an inflated earnout.
- Near the time for management meetings, the sellers recanted their positive statements on growth prospects, ownership of IP, and a myriad of HR issues.
- Even with a deal nearly done, and an LOI in place, sellers found an “excuse” to cabash the deal. They just were not in sync with the buyer’s culture, controlling nature, or even a minor disagreement that was unresolved.