Time kills all deals.
But so do a lot of other things, and it can be the Buyer or the Seller causing the problem.
Understanding why you may be feeling this way, and just as important, why the folks on the other side of the table are reacting negatively to things, will go a long way in getting a deal closed.
This is certainly where leaning on seasoned M&A advisors with knowledge in your industry goes a long way no matter what side of the deal you are on.
Knowledge is power, so keep these deal killer problems in mind, as a Buyer or Seller, to avoid them happening to you.
Here are some key timeline event examples:
| Buyer Walks | Stage | Seller Walks |
| Seller tries to turn a simple document into a 5-page death grip on necessary M&A related information a Buyer needs. | NDA | Buyer is not OK with a simple ask like a non-solicitation of clients and employees. |
| Seller jumps right to “what’s my multiple and how big is the check going to be” or they become very defensive. | First Call/Meeting | Buyer rep needs to be the “smartest person in the meeting” and/or can’t explain their M&A game plan or tell the company story. |
| Fit and opportunity are not there or the Seller won’t answer questions to determine this. | Follow to First Call/Meeting | Buyer doesn’t answer enough questions about themselves and digs into the Seller too much. |
| Seller can’t follow directions on preliminary information needed or just disappears when asked for it. | General Information Gathering | Buyer asks for way too much information at this stage to get a further look into fit and a preliminary idea of a price point. |
| Seller or multiple owners have a very warped sense of what the business is worth versus reality, including “brand” and “sweat equity” value that doesn’t exist. | IOI/Preliminary Price | Buyer does not see what the Seller/equity holders think is the value of blood, sweat, tears, or their “brand” over X years. |
| Seller wants an LOI to be derived by way of mainly guessing and magic 8-ball. | Additional Data Gathering | Buyer asks for what amounts to post-LOI deep-dive diligence instead of what is necessary for an LOI. |
| Even after much conversation and verbalization on where the deal and structure will likely land, Seller is “shocked and appalled” by the LOI. | LOI Presentation | Buyer presents an LOI that looks nothing like what was verbalized and/or introduces concepts and hurdles that come out of left field. |
| Seller hires legal and/or other advisors that are more interested in proving how worthy they are of their hourly rates by destroying a perfectly good LOI containing agreed upon business points by turning it into a redlined battle ground that starts to litigate the transaction documents before you even start. | LOI Negotiation | Buyer and advisors refuse to add necessary detail or explain where certain details and parameters were derived from that cause the Seller to think they are walking into a trap of a purchase price they will never realize or a guaranteed re-trade on the deal during post-LOI diligence. |
| Quality of Earnings and other financial diligence surface too many previously unknown and purposely cloaked issues that don’t align with the pre-LOI information. | Post-LOI Financial Diligence | Buyer “discovers” financial items and issues they already knew about but now decide they are more of a problem than they indicated pre-LOI and want to change/re-trade the deal. |
| Diligence reveals major issues in staffing, operations, or legal matters that the Buyer is not OK with inheriting or helping to work around it and likely should have been disclosed before an LOI was signed. | Post-LOI HR, Ops, Legal Diligence | Buyer decides that they want to change the game plan on how they will handle previously disclosed scenarios related to staff, customers, operations or legal matters, which does not align with what the Seller considered a good fit from the beginning of the deal. |
| Seller and/or legal counsel start finding major issues with transaction documents that were previously not issues at the beginning, creating “hills to die on” for the Buyer. | Paperwork Finalization & Financing | Buyer financing people adding hurdles and extending timelines and/or extensive requests slowing down transaction document and schedule production. |
| Big problems surface that were just bad luck (losing a top 5 client) or seller not disclosing something (like they knew they were losing a top 5 client) as well as other controllable and uncontrollable business shifts causing instability in the forward financials or business operations. | Pre-Close Work | Seller not understanding working capital peg and true-up calculations, indemnification needs brought up by diligence, escrow needs and the like, causing enough Seller angst for them to give up. |
| Buyer walks because Seller is more emotion than business and is not getting good enough advice to keep them on the rails of reality or from thinking the entire process is all about “how the Buyer can get one over on them” every day. | Anytime | Seller walks because each step is getting dragged out, Buyer communication is horrible, they are tired of providing “just one more thing,” Seller’s remorse is taking over, family members are getting nervous, and a host of additional things invisible to the Buyer. |
Perspective note: This article reflects Cogent Growth Partners’ perspective, shaped by 16 years in business and experience advising on more than 200 closed transactions in the IT services and MSP market.
