Superstitions and Deal Killers
Beware the Ides of March.
Watch out, it’s a Full Moon.
Friday the 13th is coming!
Is it just us, or does this week seem particularly well-suited for the superstitious? Along with the above, we’ve been hit with the annual “Spring Forward” introduction to Daylight Saving Time, which is typically accompanied by sluggishness and extra coffee for the business community as we all cope with losing an hour of sleep.
We’ve seen superstitions kill a deal or two in our time, such as the Buyer who considered it a “bad omen” that a business had been incorporated on 6/6/2006.
With this in mind, we’re sharing a list of the top “Deal Killers” that can break a good transaction even after the Buyer and Seller have agreed to a price, deal structure and closing date.
Moving the Goalposts
That purchase price looked good when the Buyer first presented it, but what if the number… were bigger? Asking to increase the price after a Letter of Intent has been signed is hard to justify to a buyer.
Celebrating Before Running Through the Finish Line
The deal isn’t done until it’s done. A month before the closing date isn’t the time for a business owner to take a two-week vacation – the business needs to continue to perform at the same levels it was prior to due diligence, or the Buyer and lender may not be able to make the deal work.
Inaction Causing Delay
The reason The Firm Advisors has a higher closing rate than the national average is because we keep our deals on track. Reasonable due diligence requests – such as inventory counts, up-to-date profit and loss statements or A/R agings – should be responded to promptly.
A business’s financials should be easily explainable to a Buyer or Lender. For instance, a retail-based company should be logging all its income, including cash.
Death of Partner, Owner or Spouse
These are terribly sad situations for all involved. The death of an associated party can delay the sale of a business for months or years if there are no predetermined steps to address how the normal course of business should proceed.
Keep the above in mind when signing a Letter of Intent – and maybe throw some salt over your shoulder for good measure.
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