We know that beyond the dollars involved, once the letter of intent is accepted by all, there is still a long way to go, and this does not guarantee that the transaction will be concluded. There can be elements of diligence that stand out, uncontrollable ones, and emotions.
At the buyer level, it can happen that it falls apart at the end of the due diligence. In one case, the risk factors were known, but when it all came together – the buyer was dissatisfied. We then learned that this buyer has already made offers on other companies, without ever closing a transaction. He ended up growing his company organically.
In the general context of the transaction, we saw a strategic supplier refuse to support the buyer. Unfortunately, it could not be replaced without consequences, and the buyer’s bank had asked to obtain the support of this third party in writing! This buyer therefore found himself without possible financing.
We have seen a shareholder refuse to sell at the very last minute. After going through all the stages of financial negotiations, terms, and conditions, he said he was “not ready to retire…especially since he didn’t love his wife that much”…he wouldn’t know what to do of his time. A few years later, he still owns his business.
In the overall context of the transaction, we saw a strategic supplier refuse to support the buyer. Unfortunately, the supplier could not be replaced without consequences, and the Buyer’s bank had asked to obtain in writing the support of this third party! This buyer was therefore left without any possible financing. We sold this company to another buyer afterwards, creating delays as we restarted the whole process.
Buying or selling a business is a complex operation. We deal with people and emotions in addition to an entity that has its own financial, operational, and legal particularities. Beyond the facts, when we don’t agree on amounts, conditions, and a transition… we must worry about the third parties that could be strategic, the level of readiness for the sale of the shareholders, and the motivation of the buyers.
I even surprised a client by asking him if his co-shareholders knew he wanted to sell.
Overall, various aspects can derail a transaction and the deal is not done until the ink is dry on the contract.