Why Some Business Sale Transactions Miss the Mark

Most of our clients have survived decades of being in business. Like squadron leaders, they have spent their careers making decisions “in the arena” with less than perfect information. The culmination of those years of decisions has actually become a honed instinct leading to preservation, prosperity, growth, and sustainability. One by one, lesser leaders and their organizations have fallen by the wayside. There is inevitably a part of these successful business owners that must feel like one of those old war planes that miraculously returned to base with chunks of its wings missing, bullet holes all through the sides, landing gear dangling, and the crew exhausted from battle. 

This instinct for self-preservation, risk assessment/avoidance, ambition, and even grit is a secret, hard-to-quantify, success variable. In many industries, keeping a conservative balance sheet, cash in the bank, and open communication with vendors, suppliers, and lenders are some of the reasons why businesses survived events such as the economic fallout of 9/11, black Monday, the war in Iraq, hurricanes Katrina/Rita/Ike/Sandy/Harvey, other natural disasters, the 2007-2009 global depression, 2015’s oil/energy slump, and now COVID-19 and all its fallout.

That’s why when I think about all it took to effectively navigate a life in business over the past 20+ years, I scratch my head in wonder when these same business owners do little to no research when it comes time to select an M&A transaction advisor/partner to lead them through the last great business deal of their lives. There’s no doubt the proper handling of the sale of one’s business is the largest and most important milestone of a business career.

When selecting a transaction advisor, I often ask business owners if they’ve “Googled” the M&A brokerage firm they’re thinking about using. And if not, why not? Try Googling the firm name followed by the word “lawsuits.” How about asking for and actually calling a firm’s references? In the last 5 years, I can recall only two of our prospective clients asking for references, and one of them didn’t even bother to call them! Come to think of it, I occasionally wonder why I’ve never been asked to provide the name of an attorney or CPA that we collaborated with on a past transaction as a reference. I’d ask for this if I were in the business owner’s shoes! 

Now one could look at this two ways: (1) I could pat the GaP team on the back and say that we’re such good conveyors of our value proposition that business owners instinctively know they need not look further. (2) I could conclude that business owners are getting caught up in marketing and hype used by many M&A advisors and business brokers, and that these business owners aren’t always doing proper diligence.

If you’re thinking about selling your business, my advice is to look for an M&A transaction advisor with a step-by-step, confidential, and effective process that makes sense to you, one with a track record of success, and one where the advisor’s employees actually doing the heavy lifting for your deal are among the best of the best in the business. You’ll also be well served to align with a firm who “M&A transaction CPA and attorney specialists” find to be thorough and impressive. A firm with those endorsements and qualities will save you time and money spent on tax and legal counsel. And they’ll locate the buyer you believe to be the best fit, who is willing to meet your terms, and who is capable of preserving your legacy.

Selling your business will be one of the “hardest-to-achieve” accomplishments of your life. Make sure you align yourself with an M&A transaction firm that listens to your goals and places them as their ultimate objectives. Make sure it is a firm that asks hard questions, that is not interested in just telling you what you want to hear, and that teaches you truth grounded in facts and statistics. Your M&A advisory team should spend literally hundreds of hours poring over the intimate details of your business and personal income. We’ve found that most transactions take up to 1400 hours from our in-house Analysts, Researchers, CFO/accounting staff, and the Partner acting as Deal Team leader. Again, if the firm you choose doesn’t have all these resources in-house, this could result in your dealing with frustrating situations, lack of accountability, financial drain, and poor time management. Therefore, the Deal Team and its leader need to be a good personality fit, too. Make sure you trust their instincts, their integrity, their street smarts, and their confidentiality. Then, once all of this feels right, go for it! There’s never been a better time to be a seller.

I wish you the best!

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‍If any of this resonates with you, we encourage you to take our Sellability Assessment and talk with us to see if your business makes the cut as one who can still command a great exit in this M&A environment. We will be in touch quickly to discuss the results. Click here to take the assessment.

Gilbert & Pardue Business Advisors (GaP) is a Houston-based business advisory firm serving lower middle market and middle market business owners from coast to coast through representation for Mergers & Acquisitions (M&A).

Matt Gilbert and Bret Pardue established GaP to provide owners of lower middle market and middle market businesses – those businesses generally enjoying annual revenue of $10-$75 million – with the quality of M&A representation and value-enhancement services previously only available to upper middle and large businesses. GaP brings highly experienced executives, sophisticated financial and marketing products, proven-effective processes, and fully-integrated expertise to every engagement. No other M&A firm serving the lower middle and middle markets provides the quality of representation and transactional expertise that we do.