There is an old saying in deal making:
It is this perspective gained from years of experience that keeps most dealmakers in the game (and sane).
But what if you are attempting to close a deal with a buyer WITHOUT professional M&A advice and counsel? Could you ride that emotional rollercoaster without help from seasoned pros, like our team at Generational Equity?
Sadly, many attempt to do so and fall far short of their goal when one or more issues arise at the 11th hour and cause buyers to walk.
So what are some common deal breakers that you should avoid?
First and foremost, make sure your documentation is accurate. This sounds so simple, yet it is probably the least understood by sellers. Unless you have multiple college degrees in finance, accounting, marketing, management, HR, IT, sales, and negotiating, you will have a very tough time making sure that what you present in your documentation is accurate (and timely).
Because the level of documentation required is impossible to fathom until you attempt to do so. Here is what a few of our clients have to say about this topic:
The common theme you hear from these folks is this: The accuracy of your documentation will directly impact ANY buyers’ comfort level with what you are saying about your business. If your documents are full of errors or inconsistencies, then buyers will “discount” your company valuation and/or apply terms and conditions to protect them from potential loss.
Avoid all of this by taking the time to create documents that correctly portray your opportunity to buyers. The more confidence you can give buyers, the more likely it will be you will close an optimal deal.
This old saying may sound like a given, but the fact is far too many sellers try to hide historical events from business buyers until the 11th hour. They assume that the issue that happened three years ago will ultimately have little impact on the deal. The reality is that to some buyers it might.
It is far better to over-disclose than under-disclosed. Trust me, buyers will find out through due diligence about anything that has happened that affected your company materially in the past.
So let them know about any historic issues that affected your company value and especially any pending legal, HR, financial or managerial items you are currently dealing with. They may seem immaterial to you, but to many buyers they will not be.
Ultimately ask yourself these questions:
The answer to these questions will go a long way to determining what you need to share.
Finally, create pro forma projections that are not only accurate, but ACHIEVABLE! If your company has been growing at a 10% rate annually for 20 years but you suddenly forecast growth of 30% annually over the next five years, red flags will go up. Especially if you can’t document why this change will happen (see first section above).
This is especially true in the base year of your pro forma, the year that you will use for negotiations with buyers. If you have a calendar year end and you are in due diligence with a buyer in August and your base year is trending 10% behind your forecast, you need to be ready to explain why and how you will catch up by December 31. If you can’t, count on the buyer using a base year number that will be far less than yours in the final deal structure.
In selling a business, this old saying really applies: It is far better to under promise and over deliver.
We hope these tips will be helpful if you are forced to negotiate with a buyer on your own. Avoiding the “two deaths to make a deal” scenario is important for your sanity and emotional wellbeing.
But we believe it is far better to hire an experienced firm to represent you in the most important financial decision of your life. By doing so you will instantly tap into collective years of wisdom and successful deal making experience. Generational Equity has closed more deals over the past 10 years than any other lower middle-market M&A advisory firm in North America. Here is important information about our firm:
If you are interested in learning more about deal breakers and how to avoid them, you should set aside a few hours to attend one of our CEO exit planning conferences. We hold these complimentary meetings throughout North America, and they are designed to educate business owners on exit planning strategies, dealing with buyers, and how to close a deal for the optimal value.
Please contact us if you would like to attend or call us at 972-232-1121.
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2017 Generational Equity, LLC. All Rights Reserved.
The information we learn from customers helps us personalize and continually improve your experience at gencm.com. Here are the types of information we gather.
Information You Give Us: We receive and store any information you enter on our Web site or give us in any other way. We do not sell or rent your personal information to others without your consent. We use the information we collect only for the purposes sending promotional information, enhancing the operation of our site, serving advertisements, for statistical purposes and to administer our systems. We DO NOT use third parties to provide customer service, to serve site content, to serve the advertisements you see on our site, to conduct surveys, to help administer promotional emails, or to administer drawings or contests, but reserve the right to do so in the future without advance notice. Our computer system protects personal information using advanced firewall technology.
Information from Other Sources: For reasons such as improving personalization of our service, we might receive information about you from other sources and add it to our account information.
Generational Capital Markets LLC may license the use of its intellectual property including but not limited to its name, likeness, and logo for the use of affiliated offices. Such affiliated offices may not be owned, controlled, managed, supervised or staffed by employees, officers, or agents of Generational Capital Markets, L.L.C. Affiliated offices may be independently owned and operated. For more information about a particular office, please contact Generational Capital Markets LLC at is office in Dallas, Texas.
This page may contain other proprietary notices and copyright information, the terms of which must be observed and followed.
INFORMATION ON THIS WEB SITE IS PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT. SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION OF IMPLIED WARRANTIES, SO THE ABOVE EXCLUSION MAY NOT APPLY TO YOU.
Information on this web site may contain technical inaccuracies or typographical errors. Information may be changed or updated without notice. Generational Capital Markets may also make improvements and/or changes in the products and/or the programs described in this information at any time without notice.
Generational Capital Markets does not want to receive confidential or proprietary information from you through our web site. Please note that any information or material sent to Generational Capital Markets will be deemed NOT to be confidential. By sending Generational Capital Markets any information or material, you grant Generational Capital Markets an unrestricted, irrevocable license to use, reproduce, display, perform, modify, transmit and distribute those materials or information, and you also agree that Generational Capital Markets is free to use any ideas, concepts, know-how or techniques that you send us for any purpose.
Information Generational Capital Markets publishes on the World Wide Web may contain references or cross references to other products, programs and services that are not announced or available in your country. Such references do not imply that Generational Capital Markets intends to announce such products, programs or services in your country. Consult a Generational Capital Markets representative for information regarding the products, programs and services which may be available to you.
Generational Capital Markets makes no representations whatsoever about any other web site which you may access through this one. When you access a non-Generational Capital Markets web site, please understand that it is independent from Generational Capital Markets, and that Generational Capital Markets has no control over the content on that web site. In addition, a link to a non-Generational Capital Markets web site does not mean that Generational Capital Markets endorses or accepts any responsibility for the content, or the use, of such web site. It is up to you to take precautions to ensure that whatever you select for your use is free of such items as viruses, worms, trojan horses and other items of a destructive nature.
IN NO EVENT WILL Generational Capital Markets BE LIABLE TO ANY PARTY OR ANY DIRECT, INDIRECT, SPECIAL OR OTHER CONSEQUENTIAL DAMAGES FOR ANY USE OF THIS WEBSITE, OR ON ANY OTHER HYPERLINKED WEBSITE, INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS, BUSINESS INTERRUPTION, LOSS OF PROGRAMS OR OTHER DATA ON YOUR INFORMATION HANDLING SYSTEM OR OTHERWISE, EVEN IF WE ARE EXPRESSLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Furthermore, all information contained within this website is the property of Generational Capital Markets.
Honored to win Investment Banking Firm of the Year 3 years running.
Over 50 awards and counting.
Sign up to receive regular email updates, industry-leading insights and details on complimentary M&A executive conferences in your area from our award-winning team
Success, you have been added to our list.