Deals fall apart for many reasons - some reasonable, some not so reasonable.

For example:

• The seller doesn't have all his financials up to date.
• The seller doesn't have his legal/ environmental/administrative affairs up to date.
• The buyer can't come up with the necessary financing.
• The 11th-hour "surprise" surfaces, causing the deal to fall apart.

The list could go on and this subject has been covered many times. However, there is a hidden reason that can occur, usually about three-quarters of the way to closing. It is often first seen as a lack of momentum on either the buyer's or the seller's part.

 

No one notices at first. Even the advisors who are busy doing the necessary due diligence and paperwork don't notice it. An experienced business intermediary will notice it. He or she will recognize the early warning signs. The buyer can't get through to the seller, calls are not returned, or the reverse happens. One or the other calls the intermediary who assures the caller that he or she will call the recalcitrant one and have him or her get in touch.

The intermediary calls and receives the same response. Calls are not returned; one side or the other begins to drag their feet in providing documents, financial information, etc. To the experienced intermediary the "red flag" goes up. Something is wrong. If not resolved immediately, the deal will lose its momentum and things can fall apart rapidly. What is this hidden element that causes a loss of momentum? It is generally not price or anything concrete.

It usually boils down to an emotional issue. The buyer or seller is getting "cold feet." It often is the seller who has decided that he really doesn't want to sell and doesn't know what to do; so he just tries to ignore the proceedings and the loss of momentum occurs.  It may also be that the buyer has discovered something that is quite concerning and doesn't know how to handle it. Sometimes, the chemistry between buyer and seller is just not there, at least for one of them. Regardless of the reason, this loss of momentum should be addressed if the sale is to have any chance of closing.

Because it often stems from an emotional issue, it has to be faced directly. An advisor, the intermediary, or someone close to the one dragging his or her feet should immediately make a personal visit. Another suggestion is to get the buyer and seller together. The sooner this loss of momentum is addressed, the better the chance there is for the deal to continue to closing.