No Motivation – No Deal

As the year draws to an end, it is interesting to review our investor inquiries and deal flow in 2014 in order to identify some of the contributing factors that left some business sellers, as well as investors, without a deal. Most significantly, one factor is the outstanding one: motivation – or better, the lack thereof.

There is no question that in these times of ever-increasing desire for instant gratification, a lot of folks simply do not set sufficient time aside to properly position themselves for a deal – on both the buy and sell sides!  “History has shown over the past thirty years,” says Achim Neumann, President, A Neumann & Associates, New Jersey, “that it takes, on average, a year to sell a business, and a little bit more on the buy-side to find the right business. There are no short cuts.”

The number of buy side folks, induced by the simplicity of clicking the “More Information” button on a variety of business brokerage websites, and then never following through with their request, is staggering. Whereas such percentage has hovered around thirty percent ten years back, now the number of people requesting more investment information, but then not following through, is rapidly approaching seventy-five percent.

How does this trend relate to motivation?  It can certainly be argued that such buy-side folks never had a sincere interest to pursue a transaction.  More alarmingly, an even higher percentage of would-be investors are neither willing to sign a standard non-disclosure agreement or to provide any information to demonstrate their capacity to execute a deal.  One can almost come to the conclusion that in these times of “everything is free on the web,” investors expect detailed information about specific mid-sized business to be open and accessible to even the most casual observer.  (Unwilling to reinforce this perception, our firm will never release information without the proper documents from the buy side.)  No motivation, no deal!

How does the sell side fare?  Not much better, unfortunately.  “With the economy improving,” says Steve Wrubleski, Managing Director, Southern New Jersey, “we are being approached by an increasing number of sellers/business owners who are very much challenged to communicate the true reason for their desire to sell.”  Indeed, the goal of a business owner in his/her mid-forties to “retire” carries very little credibility with buyers on Main Street (possibly in Silicon Valley, though).

More often, it is being tired of the day-to-day business, financial woes, or some other short-term issue that has the business owner approach us to seek a sale.  But does this truly constitute an appropriate motivation?

As soon as the financial challenges subside, or a long overdue vacation has brought back some “healthy distance” from the business, the business owner’s world looks much brighter, and a sale of the business has declined substantially in priority – until the next short term challenge arises.  Does that make for a motivated seller?  Of course not, and so the same applies: no motivation, no deal!

Ultimately, many factors are easily quantifiable in a business transfer: valuations, cash flows, market share, personnel quality and growth prospects.  Very often, business people on the buy and sell side have a surprisingly similar assessment of such factors.

However, of the non-quantifiable factors, such as chemistry between buyer and seller, synergy among merged businesses, etc., it is the lack of motivation that more often than not will prohibit the final execution of a deal.

It’s simply true: no motivation, no deal!