Lucido Global Business Brokers

Lucido Global Business Brokers

Adding Value, Creating Wealth

  • Home
  • About Us
    • About Us
    • Suite of Services
    • Our Team
  • Buying a Business
    • Buying a Business
    • Buying a Business Tutorial
  • Selling a Business
    • Selling a Business
    • Selling a Business Tutorial
  • Visas & Immigration
  • Businesses For Sale
    • Featured Businesses
    • Florida Businesses
  • Blog
  • Contact Us

Dealing with Inexperience Can Ruin the Deal

By Sam Mohlenhoff Aug 24

The 65-year old owner of a multi-location retail operation doing $30 million in annual sales decided to retire.  He interviewed a highly recommended intermediary and was impressed.  However, he had a nephew who had just received his MBA and who told his uncle that he could handle the sale and save him some money.  He would do it for half of what the intermediary said his fee would be – so the uncle decided to use his nephew.  Now, his nephew was a nice young man, educated at one of the top business schools, but he had never been involved in a middle market deal.  He had read a lot of case studies and was confident that he could “do the deal.”

Inexperience # 1 – The owner and the nephew agreed not to bring the CFO into the picture, nor execute a “stay” agreement.  The nephew felt he could handle the financial details.  Neither one of them realized that a potential purchaser would expect to meet with the CFO when it came to the finances of the business, and certainly would expect the CFO to be involved in the due diligence process.

Inexperience # 2 – It never occurred to the owner or his nephew that revealing just the name of the company to prospective buyers would send competitors and only mildly interested prospects to the various locations.  There was no mention of Confidentiality Agreements.  Since the owner was not in a big hurry, there were no time limits set for offers or even term sheets.  It would only be a matter of time before the word that the business was on the market would be out.

Inexperience # 3 – The owner wanted to spend some time with each prospective purchaser.  Confidentiality didn’t seem to be an issue.  There was no screening process, no interview by the nephew.

Inexperience # 4 – The nephew prepared what was supposed to be an Offering Memorandum.  He threw some financials together that had not been audited, which included a missing $500,000 that the owner took and forgot to inform his nephew about.  This obviously impacted the numbers.  There were no projections, no ratios, etc.  This lack of information would most likely result in lower offers or bids or just plain lack of buyer interest.  In addition, the mention of a pending lawsuit that could influence the sale was hidden in the Memorandum.

Inexperience # 5 – The owner and nephew both decided that their company attorney could handle the details of a sale if it ever got that far.  Unfortunately, although competent, the attorney had never been involved in a business sale transaction, especially one in the $15 million range.

Results — The seller was placing almost his entire net worth in the hands of his nephew and an attorney who had no experience in putting transactions together.  The owner decided to call most of the shots without any advice from an experienced deal-maker.  Any one of these “inexperiences” could not only “blow” a sale, but also create the possibility of a leak.  The discovery that the company was for sale could be catastrophic, whether discovered by the competition, an employee, a major customer or a supplier .

The facts in the above story are true!

The moral of the story – Nephews are wonderful, but inexperience is fraught with danger.  When considering the sale of a major asset, it is foolhardy not to employ experienced, knowledgeable professionals.  A professional intermediary is a necessity, as is an experienced transaction attorney.

Copyright: Business Brokerage Press, Inc.

Nyul/BigStock.com

Categories: Seller Articles, Seller FAQ, Selling a Business

Prev
Next

Featured Businesses

Subscribe to our Newsletter

No worries, your information is safe with us. We hate spam too!

From Our Blog

5 Ways that Sellers Can Focus on the Positives

January 21, 2023

When you are looking to sell, always focus on the positive aspects of your business. Many business … Read More »

The Top 3 Reasons Why Deals Fall Through

January 14, 2023

No one likes to think about the deals that didn’t succeed. However, the fact of the matter is that … Read More »

The Four Essential Stages of a Closing

January 7, 2023

When it comes to reaching a successful closing, there are four important stages to keep in mind. In … Read More »

Take Inventory of Your Company

December 17, 2022

Most business owners don’t give a second thought to the idea of going to the doctor for an annual … Read More »

5 Elements for Buyers to Investigate

November 19, 2022

When you’re in the process of buying a business, it’s important to stay logical. No matter how good … Read More »

Defending Your Asking Price

November 12, 2022

When you’re putting your business on the market, one of the top considerations is your asking price. … Read More »

Global Business Brokers

Contact Us

Lucido Global Business Brokers
Keller Williams Coral Gables
550 Biltmore Way PH II A-B
Coral Gables, FL 33134
Office (305) 662-7325
Direct (954) 913-5464
rod@globalbusinessbrokers.net

Adding Value, Creating Wealth

  • 5 Ways that Sellers Can Focus on the Positives
  • The Top 3 Reasons Why Deals Fall Through
  • The Four Essential Stages of a Closing
  • Take Inventory of Your Company
  • 5 Elements for Buyers to Investigate

Join Our Team

Copyright © 2023 Lucido Global Business Brokers
MENU
  • Home
  • About Us
    • About Us
    • Suite of Services
    • Our Team
  • Buying a Business
    • Buying a Business
    • Buying a Business Tutorial
  • Selling a Business
    • Selling a Business
    • Selling a Business Tutorial
  • Visas & Immigration
  • Businesses For Sale
    • Featured Businesses
    • Florida Businesses
  • Blog
  • Contact Us