We often get an inquiry from this business owner because this is usually the only time he will sell a company. He wants advice from us
and his position is that he will hire our firm to represent him if this buyer
falls through. Really the best advice we can give him is to engage our firm and
let us throw this buyer into the mix of potential buyers that we will uncover.
His response is almost always, I just want to see how this buyer plays out. We
have watched this movie that I will call the Single Buyer Syndrome, a hundred
times Jonathan Marchessault Golden Knights Jersey , so let me describe how it plays out.
? The potential buyer begins an exhaustive courting and informal due diligence process without any offer or Letter of Intent.
? The owner takes his eye off the ball, counting his millions prematurely and
devotes less attention than usual in running his business.
? The buyer draws out the process by delaying and rescheduling meetings. He does not treat
this process with the same focus and sense of urgency that the seller is now
consumed with. Do you know why? The buyer is doing the same dance with 3 or 4
other prospective acquisitions.
? The seller has a difficult time getting the buyer to put some terms and conditions in writing. If he does, it provides a
good deal of wiggle room to adjust his offer as due diligence
progresses.
? The process seems to stretch on and on as more meetings get delayed and rescheduled.
? Finally Brad Hunt Golden Knights Jersey , the seller gets aggravated and begins to put some time limits and demands on the buyer.
? The buyer now gathers his team of accountants, attorneys, operations managers William Karlsson Golden Knights Jersey , and others to tear apart your company.
? This team finds all kinds of problems that they use to justify lowering the offer and increasing the reps and warranties and increasing the
amount of hold back in an escrow account. They also bring up the requirement for
owner financing for the first time.
? The buyer has carved a significant chunk out of his offer while using all his experts to back him up. The seller is
now 6 months into the process and the buyer knows that you have a great deal of
skin in the game. He is counting on the seller to just cave and weakly counter
because this process has just worn him down.
? If the seller relents, he likely has had his original offer reduced by 20% or more. The original offer,
however David Perron Golden Knights Jersey , started below what the business was actually worth. If he sells under these circumstances, he likely will realize
30% or more below what a fair market competitive bid situation would
produce.
? The other response from the seller is to be insulted and blow up the deal, leaving his company in a weaker state than when this whole process
began. The seller focused much of his own energy on this process rather than
running his business.
? The buyer moves on to his next acquisition candidate with the same M.O.
Unfortunately Luca Sbisa Golden Knights Jersey , the story does not end here. Many owners will go through this process more than once. It can stretch on for years because
he can normally process only one buyer at a time. The only way to insure the
right selling price is to throw these buyers into a formal M&A process. When
you do, these buyers usually drop out of the running pretty quickly because they
want to find a bargain. You worked too long and too hard to suffer from Single
Buyer Syndrome and sell your company for a discount.
Author's Resource Box
Dave Kauppi is a business broker and President of MidMarket Capital. We help business owners with all aspects of Mergers and Acquisitions.
Article Source:
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