25 Jun Deal Breakers
Posted at 22:36h in Selling a Business 0 Comments
You are ready to learn how to sell your business…but you should be aware of the eight most common deal breakers.
- An undisclosed material fact surfaces at the due diligence stage or just prior to closing. This could include a variety of issues such as the loss of some major accounts, a problem with a major product, or an environmental or regulatory problem.
- The seller, a C Corporation, figures out the amount of the double capital gains taxes in an “asset sale” and tries unsuccessfully, at the last moment, to convince the buyer to do a “stock sale,” which would be a single capital gains tax.
- At the purchase and sale agreement stage, the buyer wants his note uncollateralized and wants a hefty escrow account or an unrealistic list of “reps and warranties.”
- The chemistry between the buyer and seller was never really established, so when the deal runs into road blocks for a number of reasons, including the egos of the advisors, there is no personal relationship to bridge the differences nor to get the deal back on track.
- The buyer is under-capitalized and, just before closing, the buyer is unable to raise the necessary cash to do the deal.
- Seller’s remorse happens more often than one might expect. It is like a bride backing out the day before the wedding. In the case of seller’s remorse, the seller realizes that his life’s work, the company, is too important and he cannot part with it.
- The deal lags and either buyer or seller loses patience and walks away from the deal.
- The seller loses control of the deal either to the buyer or to one of the advisors. The seller is not accustomed to the selling process and succumbs to the other players. Out of resentment, the seller picks up his marbles and goes home.