5 ways to kill a deal

Selling a company is hard work and emotionally draining, but it can also be one of your career’s most beneficial and rewarding experiences.

The opposite of a successful transaction is one that makes progress but doesn’t close – because you’ve borne most of the costs but don’t get the rewards.

Thankfully, it’s easy to predict the issues that prevent a deal from closing. These are the five most common deal killers and strategies for avoiding them.

1. 1. Missed expectations.
      A deal doesn’t have a chance unless it meets your objectives. Financial terms are paramount, but it’s also important to think about the future of your company and its employees, customers, and suppliers. Clearly define and articulate your goals before you start the process. Otherwise, you might reach an agreement with a buyer on price, terms, and tax treatment only to find out too late that there is disagreement on other issues, like the company’s future location, for example.
   2. Decline in sales or profits.
      Buyers understand normal fluctuations, but a significant change in financial performance can cause buyers to question the company’s stability or future. That’s one of the reasons for minimizing customer concentration before you sell. It’s also a good reason for working with a team who can run the sale while you stay focused on the company during the process.
   3. Surprising news.
      Buyers don’t ask for everything they want or need to know in the early phases of the sale. Instead, they trust the seller to tell them what’s important. But be careful! Disclosing bad news after you’ve agreed on a deal can not only cause buyers to change their perception of value, but it can also break trust. So, tell buyers everything they need to know – even if they don’t ask for it – before you agree on price.
   4. Change in key terms.
      In most transactions, there is a non-binding letter of intent (LOI) before the buyer engages in detailed due diligence. A deal never gets better during due diligence, and it could get considerably worse if the details reveal any inconsistencies in the information shared earlier. So, start with due diligence in mind and build a package that educates buyers – before the LOI – with a clear, complete, and consistent story.
   5. Too much time.
      Selling a company involves large sums of money and significant legal issues, to mention fundamental life changes. Buyers and sellers will both get tired – so much so that they may question their will to finish. Combat the fatigue by working with advisors who know the steps and can help you move through them quickly.

At ASG Partners, we’ve been helping business owners sell their companies realize their retirement goals for almost 40 years. If you’d like more information about market conditions, the value of your company, or how to maximize a sale, we’d be happy to chat with you confidentially. Please contact us.