A successful transaction usually requires overcoming many obstacles. Most of these obstacles are minor and easily resolved. If the parties want the deal to work, talking it through can solve almost any routine problem that arises. Outside advisors can be a real advantage in these negotiations.
However, there are more serious issues that do not resolve so easily and can be fatal to the closing of the deal. Below are just a few examples:
The seller may be unwilling to agree to some of the conditions presented by the buyer. Many times these conditions provide too many loose ends for the seller, or they weren't part of the original agreement. No one is willing to bend; there appears to be no solution, and the deal craters.
Due diligence uncovers problem areas such as environmental concerns or additional liabilities. Another problem area involves competitive information. The buyer asks for a list of customers and wants to contact them. The seller doesn't want this done and an impasse results.
During the negotiations, the buyer, or the seller, discovers that there is a lack of chemistry. This can complicate the two agreeing on any other problem that develops.
There is a breach of confidentiality or a loss of credibility by either or both parties. Either one of these is usually a deal-breaker.
Some of the information presented is not accurate or is incomplete. The financials may contain too many deviations from the figures presented by the seller. There are also times when the seller's records have not been maintained properly, or the tax returns don't support the financial statements.
The buyer may ultimately decide that the deal is too big a risk, or an outside advisor, or even a friend, suggests that the business is not a good one.
There are also times when a seller suddenly realizes mid-way through the deal that he or she won't have anything to do when the business sells. As a result, the seller then tries to abort the sale.
The sale of any business involves change on both the buy and sell sides. This may threaten some of the participants or their advisors - or even family members. It is important that all parties directly involved in the selling and buying process be in agreement. No one wants either a participant or internal mischief threatening the sale.
Unfortunately, after it looks as if everything is under control, one side or the other often comes up with some last-minute demands. When this happens, these last-minute demands may cause the deal to fall apart.
The possibility of any of these issues makes it critical that a professional business intermediary be involved in every step of the transaction. They have been through many of the events outlined above and their experience and knowledge may offer the best antidote. Intermediaries are trained to anticipate many of the factors that can sour the deal and thereby solve the problems before they develop.
