Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

May 10, 2023

Why Buyers Walk Away…

By Richard Wilder

Life is Good!  You made the decision to sell your business, have a buyer that has signed an Offer to Purchase, and you are deep into the Due Diligence period.  The escrow check has been deposited with your lawyer and you have set a closing date that is 45 days away.  You can already picture the traveling that you have been promising your spouse that you would do once the business is sold. Everything is going great…and then the Buyer walks away from the deal.  What happened?

When selling a business, there are several underlying factors that can support, or undermine, a deal from happening.  These can exist on the Buyer’s, or Seller’s side and most can be avoided or mitigated by doing proper preparation before a business is listed, engaging the right M&A Advisor, and successfully completing the steps that follow signing an Offer to Purchase.  Let’s explore some of the top reasons a Buyer will walk away.

The Numbers Don’t Support the Price – When selling a business, it is critical that the price is both realistic and defendable.  If you just “throw a big number out there” you may end up with a Buyer on the line but end up wasting time (that leisure traveling is moving further away) as a Buyer will quickly do their own math and figure out that the business is overvalued. This will either happen before getting an Offer to Purchase or during Due Diligence.  Having a proper, accredited, business valuation done through a M&A Advisory firm will not only set a realistic price and demonstrate the ROI, but it will also build the case on WHY that price is realistic to a Buyer. 

Poor or Inconsistent Financials – In this situation, “Poor” does not mean the profitability of the business. Instead, it means that the financial reporting is in poor shape, or the numbers are inconsistent.  We have all heard that “the numbers tell the story” when looking at a business or opportunity.  As an example, if costs are coded to one area in one year, and another area in the next year, or even coded to the wrong year, it makes it very difficult for a potential Buyer to perform Due Diligence which can result in a lack of confidence in the business and the Buyer walking away.  Consistency is key in financial reporting and while a good M&A Advisory firm can help normalize this in a valuation or during the marketing of the business, having a good accounting firm is a great way to prepare for an eventual sale down the road.

Business is Sliding into Neglect – You’re selling the business, right?  You can avoid making some investments in the business and put a little more in your pocket now.  You can also put off making some decisions or managing the business that you might have made a few years back because a new owner can make them, right?  Wrong, wrong, and wrong!  When you are in the process of selling a business, you need to run the business as if you’re NOT selling it.  This may sound a bit crazy, but when you are selling a business, managing, and growing the business is still key to demonstrating to a prospective Buyer that the business is solid and well run.  Avoiding normal investments like replacing old equipment or doing building repairs will be noticed by a Buyer and also by your employees – who should not know anything until the deal is 100% certain to transact. When partnering with an experienced M&A Advisory firm, they should be the ones focusing on selling the business while you are focusing on running the business.

Seller Is Being Difficult – Maybe you woke up this morning and are having remorse on selling the business.  Or, you just won a contract that will be super profitable over the next few years. Or, you are getting tired of answering questions posed by the Buyer. Or, or, or……whatever the reason, this change in mental mindset can result in being not as responsive or openly communicating with the Buyer as you should be and perceived as “being difficult to deal with”.  The Buyer will imagine that if you are being difficult now, before the deal has closed, it will be even worse during the transition period.  Remember, they are the customer and giving you a lot of money for the right to buy your business.  As such, they are entitled to responsive and forthright communications.  While a good M&A Advisory firm should run interference on you being barraged for information, you need to be 100% committed to selling the business before you decide to have it listed.  It is better to wait on deciding to sell the business than having Seller’s remorse.

Financing Falls Apart – You have the perfect Buyer and have really “clicked” with them.  But then you hear that they have not been able to successfully complete bank financing.  What could have happened?  There are several things that could have gone wrong and are listed above – business is overpriced for the cash flow it generates, the financials are inconsistent and can’t satisfy the loan review process or…the Seller was never properly qualified to begin with.  Having a Seller financially qualified BEFORE they are given all your information is paramount to successfully closing the deal.  If they are not properly qualified before you sign an Offer to Purchase with them, you have essentially taken yourself off the market while Due Diligence is occurring and the Bank is processing the loan.  This can be for a few or several months and during this time, no other Buyers are being engaged, which is a tremendous loss of time and opportunity.  By choosing the right M&A Advisor, they will financially prequalify the Buyer and have them under a NDA before any confidential information is shared with them.

As you can see, there are various reasons why a Buyer will walk away.  Some you can do on your own – consistent historical financials and effectively running the business during the sale process and others can be addressed by engaging the right M&A Advisory firm to guide you through what may be the biggest decision in your business career.  A. Neumann & Associates has just celebrated our 20th year of successfully helping business owners value and sell their businesses. Whether you are thinking of selling your business in the next few years, or even 10 years from now, a Confidential conversation about the selling process sooner than later may be beneficial so you can really hit the road traveling when you successfully sell your business.

About A Neumann & Associates, LLC

A Neumann & Associates, LLC is a professional mergers & acquisitions and business brokerage firm having assisted business owners and buyers in the business valuation and business transfer process through its affiliations for the past 30 years. With an A+ Better Business Bureau rating, the company has senior trusted professionals with a deep knowledge based in multiple field offices along the East Coast and has performed hundreds of business valuations in its history. The firm’s competitive transaction fees are based on successfully completing transactions. For more information, please contact A Neumann & Associates at 732-872-6777 or info@neumannassociates.com

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“ I appreciate your diligent approach to screening buyers and sellers as well as the high quality CIM that you produce.”

Andrey O, Investor

“Finally enjoying retirement after recently selling my business using the services of A Neumann & Associates. Joe Oddo provided the conduit to a successful transaction. Joe knew when to inject input and when to simply listen and allow the buyers to vent, step back and regroup. The outcome met our expectations and got us to the finish line, which included my staying with the company six months in order for the buyers to get their footing and keep our workforce in the loop. He helped at every step by providing his expert guidance & resources. Thank you!”

Emily Parker Myers, Co-Owner - Myers McRae

“I had been in touch with Karin and Gary from A Neumann & Associates regarding some opportunities and was looking forward to meeting with them. Hence, when they organized a seminar in Princeton, NJ, I was quick to sign up. The seminar was very informative as the team walked the attendees through various scenarios and referenced real life buying/selling situations they had been through. The sessions by Gary, Karin and Achim were crisp and focused and brought clarity to potential seller and buyers. I strongly recommend the team and look forward to continue working with them.”

Gaurav Tyagi

“Thank you for your Event on "How to value, Sell, and Buy A Business for Maximum Profit" and the insight into ANA’s approach on what is involved in the Business Exit for sellers. Garys Hervieiou's "Business Valuation", Achim's "Deal structure" presentation and Karin’s "Preparing the Package" are real street knowledge shared. They answered attendees questions which makes it more interesting for learning from others. Great for small businesses like us. The presentations were totally worth our time and travel for the event to Princeton, NJ from Rockville MD. Ravi Bhutani, President, CIPS”

Ravi Bhutani

“Gary, this is to thank you for an excellent job done in selling our business. We could never have done it without your professional expertise, dedication and time put in without reservation to make it happen. We will gladly and highly recommend you to anybody in our position.  It was a pleasure to work with you.”

Pat Iammatteo, Owner

“Your vetting is simply outstanding, among the best I've seen from a broker.”

Eric H., Investor

“I recently contacted A. Neumann and Associates about getting a valuation of my business done. I spoke with Marc, who explained the process in detail. After meeting with Marc in order to get a clear understanding of my business, and what I was hoping to accomplish. His patience in answering all my questions and his knowledge of the proper way to market my business gave me great confidence that this is the firm I will be using to sell my business for max value. Working with Marc at A Neumann & Associates was very easy and professional. I did not know all that was going to be involved in selling my business but they helped me through the process. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. I highly recommend this firm to anybody who wants to sell now or down the road. Marc not only knows his stuff, but actually is a real nice guy.”

Double Diamond

“Used A Neumann & Associates to sale my business. could not imagine having done it with out the patience and experience Gary provided. Thanks Gary,”

Dennis Frazier

“Working with Marc and his company was a pleasure. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. Marc handled most of the interaction and he has one of the greatest demeanors. Again, it was a pleasure working with him and his firm.”

Douglas DiCeglio

“I recently completed an acquisition using A Neumann & Associates. Tony Valentino was very helpful and accessible during the entire process. They do a thorough job vetting both parties and got us to the finish line.”

Srini Mudambi
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If you are considering selling your business, please contact us to learn more about our comprehensive service spectrum. Our experienced professionals will answer all your questions about selling a privately held business in complete confidentiality. Please fill out our contact form, or call us at 732-872-6777. We will contact you directly and will never identify ourselves to your employees.

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