Killing a Deal
Posted by Jennifer Smith on
Last month, someone asked a great question on our Facebook page: “Have you ever had a businessperson pull out of a deal because they thought it wasn’t in the best interest of their clients for the potential buyer to take over?” Our answer was “Yes – and we fully supported that decision and found them another buyer.”
As a transaction broker, we don’t represent the buy side or the sell side…we represent the deal itself. If both parties want to get a good deal done, we will move heaven and earth to make it happen. If a deal no longer makes sense, or if one of the parties isn’t comfortable, we will either renegotiate it or kill it altogether. Perhaps a couple of real-world examples might help demonstrate how this works:
Recently, we had a seller under a letter of intent with a buyer. The buyer was going to be highly leveraged, but the financing was assured by the existing bank who wanted to keep the business. After several interest rate hikes, the increased cost of diesel, and a much higher working capital requirement than was originally forecasted; the deal no longer made sense for a highly leveraged buyer. It was (and remains today) a VERY good business, so it wasn’t fair to the seller to try to renegotiate terms for a lower price. Outcome: They were able to terminate the letter of intent with no hard feelings. We kept the buyer and seller as clients and will end up helping them both do deals that make sense in our current economic environment. A short-sighted business broker might look at that and see a large six-figure commission missed; we see it as staying true to our core values and working in the best interest of everyone involved.
Another example would be a deal we were working on last year where the letter of intent was in place and the financing was secured when the seller learned that he had stage 4 pancreatic cancer. It was devastating to everyone who knew him, except the buyer of the business. The buyer saw this as an opportunity renegotiate the deal and offer the seller half as much as he had been willing to pay prior to the diagnosis, feeling that the seller had no choice but to accept his new offer. It was quite disheartening to watch the buyer try to take advantage of the seller in what was arguably one of the most difficult seasons of his life. After a great deal of conversation, the seller ended up terminating the letter of intent and we very quickly pivoted to another buyer who would work with the seller and his family to transition the business with dignity and respect. The seller’s estate received the money from the sale and, just as important, his legacy, clients, and employees were better off for having made the switch.
You see, our core values of integrity, honesty, learning, accuracy, and adaptability are more than words on paper: they are concepts we live by. We are incredibly creative in finding ways to save deals, but sometimes they just need to die…and that’s OK. If you want to have a confidential conversation to discuss buying or selling a business, please reach out.