Making the decision to pursue a merger or acquisition can be a complicated process fraught with risk. Even when the financials look good and the potential rewards seem great, there are several reasons why a buyer might decide to walk away from a deal. Understanding these reasons can help sellers prepare for negotiations and improve the likelihood of a successful outcome.

When selling your business, you make a set of promises to the buyer. You “represent and warrant” certain facts about the business. Essentially, you’re certifying that you provided accurate information and there are no known issues pending (e.g., financial, legal, tax, compliance, etc.).

If it turns out those promises are false, the buyer has the right to recoup a percentage of the purchase price.

If you’re looking to sell your business, you will probably be evaluating investment bankers or M&A advisory firms. One of the biggest concerns people have when hiring these professionals is understanding the fees involved. What’s normal and how can you protect your interests? 

If you pay too much upfront, your advisor might not have enough incentive to sell the business.

If it’s a bad time to sell your business, consider growing instead. That’s the takeaway from one contractor whose plans to sell their business got squashed by inflation and supply chain issues in 2022. Pre-pandemic the business had been doing about $50 million in sales with $6 million in EBITDA (earnings before interest, taxes, and depreciation).

When you’re ready to retire, or exit your business, you may think selling to a competitor is your only option. 

But competitors are seldom your best buyer. They’re rarely willing to pay top value because they’re already established in the market. They can’t see that your “secret sauce” is anyhow better than theirs,

You’ve decided to sell. Now how can you get the most for your business?

Real estate principles apply, so you’ll want to clean house and maximize your curb appeal. But that’s not all that goes into a successful business sale. You need to “clean up your act,” so to speak, and address some operational issues that may not have been a priority for you over the years.

No matter how motivated the buyer and seller, selling a business is always a challenge. There’s a lot that can go wrong, and deals can fall through at any time.

Delays are one of the biggest problems contributing to deal failure. The longer the process drags on, the more likely it is that a) someone gets fed up and moves on or b) something big will happen,

The M&A world isn’t quite sure what to expect in the next recession. Private equity players weren’t nearly as dominant through the last market downturns. But today those firms have $1.8 trillion in uncommitted capital they need to put to work. With money to spend, and a timeline to do it, private equity may help keep valuations high.

We had a signed letter of intent in April and were set to close the transaction in June – until the seller’s lawyer got in the way. What should have taken 60 days ballooned into a full six months. Luckily, it still closed.

Why you need an M&A attorney: When selling your business,

When selling your business, price is not the only important factor you’ll negotiate with a buyer. The deal structure includes a wide range of considerations from transaction type, ownership and payment structures, working capital, assurances, timelines and more.

What we’re seeing in the market right now is a rise in creative deal structures.