There is an old axiom in deal making that goes something like this:
Now this reference really refers to deal killers that can be fixed and deals resurrected, often through the hard work and professionalism of an experienced M&A advisor.
However, over the years we have tracked horror stories, most of them involving inexperienced business owners who either took bad advice from their cousin Larry or because of just plain deal ignorance, that led to issues that made deals impossible to resurrect.
So, in recognition of Halloween and deal-breaking horror stories everywhere, here is a list of deal killers that we have seen over the years by business owners working without an M&A advisor:
Presenting completely unrealistic growth projections – This one is guaranteed to turn most buyers off fast. If your company has been growing at 5% annually for 30 years, claiming a capital infusion will suddenly turn that around to 30% per annum growth is not going to keep buyers around for long!
Documentation that is inadequate or, worse yet, non-existent – Don’t make the assumption that the buyer(s) should just believe you because you have an honest face… Provide historic evidence of your business and realistic pro formas that have proof/research to back them up.
Pitching a deal in non-traditional formats – Professional buyers like to see 1-2 page confidential information summaries that give them reasons to want to see your entire book of documentation. Don’t cold call buyers (usually a list of members of your country club) with an opening line of “have I got a deal for you…” If you want to attract and deal with professional buyers, be professional yourself.
Using terms that are too vague to be realistic – Avoid words in your confidential profile that are red flags such as best opportunity ever, act now to take advantage of this, unbelievable growth potential (if so much potential, why haven’t you done it), get in on the ground floor, etc. This type of jargon means your profile will most likely be headed to the shred bin.
Using the word “guarantee” – That is a major red flag, as there is no such thing…
Being rude – This is so simple it is ridiculous, but history is filled with buyers who have been turned off by a seller’s arrogance, disrespect, and general unlikability that comes across in face-to-face meetings. Buyers enjoy working with sellers that they like!
Simplistic valuation methodologies – Just because a publicly traded company in your industry is trading at 40x earnings, don’t base your valuation on that and claim, “hey, we are essentially just like them…” Remember there is a reason that they are traded on the public exchanges and you are not.
Being lazy – Far too many deals die just because sellers take too long to get back to buyers when questions are raised. Note, this is another great example of why you need an investment bank working for you: You need to run your company and they need to vet and send questions to you in an organized manner.
Taking questions from buyers personally – Too many business owners walk away in the midst of due diligence because they take a question from a buyer as an insult to their honesty and intelligence. Remember, selling a business is business; questions are not a reflection on you and your skills.
These are just a few of the hit-list deal killers that we have seen over the years. This is by no means comprehensive; it would take volumes to list them all. Suffice it to say, the best way to keep a deal from dying and keep buyers from losing interest in your company is to have an experienced M&A team by your side like Generational.
The reality is the sale of any privately held company to an optimal buyer with an optimal deal structure is pretty miraculous. One of the reasons that our company has been so successful over the years is that we help our clients out by working miracles out for them. Here are a few examples:
To learn more about how our services can help you avoid a deal-killing mistake, one that could negatively impact you, your financial future, and your legacy, plan on attending a Generational Growth and Exit Strategy Conference near you. You can find one close to you here.
And no matter what path you choose on your journey, be sure to avoid the movie “Halloween Deal Killers” in a theater near you!
Carl Doerksen is the Director of Corporate Development at Generational Equity.
© 2022 Generational Equity, LLC All Rights Reserved
After attending a conference with GE, I decided that the value they bring would be worth the expense and as soon as I started working with them, I realized that was the right decision. When we started to get LOIs, Fred Zweifel took the lead on the communication and supported negotiations throughout the process, which got tricky as we moved forward. I learned that it can be common for companies to make a great offer then work to erode that price with their discoveries, but Fred and the GE team kept that from happening.Caroline Connelly, CEO, OptoTest
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.Robert Evans, President and CEO of Mealtracker Dietary Software
Thanks to you, the entire GE team and especially Michael Goss for driving a great valuation, coaching me and driving the process across the finish line. Please let me know if there is anything I can do to support GE going forward. P.S. Given my experience with GE I felt comfortable enough to sign up with Generation Wealth Advisors!Tom Currier, Former President & CEO, Rackmount Solutions
I wanted to take this opportunity to thank you for all that you have done for us. Not only did you take care of all the aspects of the sale but took extra care to make sure we knew what it looked like every step of the way. I will definitely recommend your company to anyone that is in a position to or looking to exit their business.Shane and Johanna Kline, Owners of Vision Upfitters
The most important contribution I think Ahmad made was with his personality and work ethic. He is sincere, efficient, and very hard working. He was available to me at all times, whether it was for specific detail of the negotiation or just to talk through the bigger picture. He listened, advised, and recommended, but never forced his idea or opinions. In the time we worked together, he became a valued colleague and also a friend.Salvo Stoch, Founder and CEO of Sleeping Partners
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.Jay Dinnison, Owner of Sharpe Mixers
Through the sale process, Generational brought in several interested buyers and we closed in about 6 months. I am so glad I accepted that invitation to the conference and could not be happier with the whole process. The team at Generational coupled with their knowledge and guidance was so valuable that in the end, I know I could never have done this on my own!JoAnn Ellis, Owner of Fondren 5 Star Kennels
The professionals at Generational Equity then helped develop a roadmap for enhancing the value of the firm and an evaluation report. This was completed by June 14, 2021. We then developed the Confidential Information Memorandum and put Taylor Studios, Inc. on the market by July.Betty L. Brennan, President, Taylor Studios
Generational Equity’s professional staff helped me every step of the way. Their network and professionals are the only reason I sold my company this quickly. For me this is a once in a lifetime sale and I was unfamiliar with the process. I was able to lean on them with questions and concerns.
We had the pleasure of working with Mr. Ahmad Behjati Managing Director, M&A, for Generational Equity during our acquisition of Papa's Dodge in late 2021. Generational Equity and Mr. Behjati represented and marketed Papa’s Dodge. As our primary contact, Mr. Behjati was professional in every facet of this acquisition process, conveying valuable advice most times and assisting us in every step of the process.Rick Greene of Dobbs Equity Partners LLC
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.Terry D. Wickman, President, Keytroller
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.Andy Graham, Vice President, Modern Heating & Plumbing
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Terry D. Wickman, President, Keytroller
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.Jay Dinnison, Owner of Sharpe Mixers
I decided to attend the conference and hopefully receive some guidance on how to structure an exit plan of my business. Upon arriving at the conference, I was so impressed with the presentation given by Generational Equity that I set a future appointment that week to discuss the possibility of selling my business with their Senior Managing Director David Robinson.JoAnn Ellis, Owner of Fondren 5 Star Kennels
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.Larry Moore, Owner, A Company Portable Restrooms
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.Pete L.
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
We were represented by Michael Goss with Generational. The due diligence was grueling and exhausting, but Michael propped us up and kept us motivated throughout the process. Debi and I continued to ask each other how we could possibly make it through this process without the assistance of Michael. Michael's professionalism and knowledge is absolutely amazing, and we are so blessed to have had him by our side as we made our future dreams come true.Bob and Debi Lee, Owners of BL Technology, Inc and BL Tl Services, LLC
I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.Robert Evans, President and CEO of Mealtracker Dietary Software
I am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!Eric Erlandson, Owner, Action Fastenings, Inc.
T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.Bryan D. Horn, Owner, Over Under Clothing
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