The things that can sink a deal are far more numerous than anything we business intermediaries might count on as tools to help us help our seller and buyer to complete the transaction. Most common: buyer finance issues, seller disclosures in due diligence, lender cold feet well into the process, advisors on either side introducing unsolvable hurdles, seller tax liability and of course, personality conflicts between buyer and seller. Even in our almost twenty years, the things that crop to snag a deal are often completely unexpected- this industry still regularly surprises.
Two recent closings stand out, because the single greatest component for a deal’s success were present throughout: a motivated seller, and a motivated buyer.
Last fall, the owner of a successful high-end retail store (that sold the most premium window treatments) was ready to exit, as his other business, a real estate development company, was becoming so successful. The store ran itself more or less; he had the right folks in place to keep it going indefinitely, and it required little of his time. But he was at a crossroads— capacity at the current location was almost complete— it was time to expand. As sellers will, he decided this was the opportunity for the next owner.
Many buyers toured, offers came in lower than asking price, because though justified by performance, the ask was a high multiple. Finally, the right buyers surfaced, a local husband and wife, owners of several other businesses, who yet had the bandwidth and the excitement to take the seller’s vision to the next level. A deal was struck.
However, rising interest rates threatened the deal; conventional and SBA lenders refused to guarantee the rate. The buyers walked. Weeks passed.
Alliant found an SBA lender marketing themselves as offering a “fixed” rate. Other SBA lenders disparaged the term, saying it was a bait-and-switch. Alliant negotiated with the lender and was able to secure a promise of a rate cap for the buyer. That buyer re-sent the LOI while on vacation far across the world. Thereafter due diligence contained all the usual snags, but the seller and buyers met regularly, patiently dealing with each one as it surfaced. Their rapport increased, and the deal closed. Motivated seller and motivated buyer.
Also during the fall of 2022, Alliant represented the seller of a tree service on the gulf coast. Strong inquiries and visits were consistent from day one, from individual buyers, from PEGs who wanted the company as an add-on and strategic buyers in the industry. The seller was putting in a lot of time meeting with buyers while trying to keep the situation confidential with his employees. Finally, ten months into the offering, a buyer came along who although he had with no experience, was eager to learn the industry, was from the area, and wanted to relocate his family back to his home town. Buyer and seller found that they had family relationships in common. The buyer was also pre-approved by a national SBA lender, so Alliant shared the CIM. Seller and buyer hit it off- they had mutual family contacts. The buyer submitted an offer, but which asked for a closing seven months hence, when he could relocate his family. Feeling this was the right buyer, the seller offered a lower price than in the LOI, if the buyer would agree to close just after the new year, rather than late May. He did and the LOI was signed by both parties.
During due diligence, the lender and their legal department (in another state), introduced new requirements, which delayed and seriously threatened the deal, pushing the seller way past his limits. Alliant was on call 24/7 during that period to help keep the process moving such as it could, and to help prevent individual personality conflicts from stepping into its path.
The third party attorney (representing neither side) who drafted the purchase agreements and was responsible for close was out with COVID at the most critical time, and his assistant made mistakes in the settlement agreement. Still, the acquisition did close, primarily because the seller and buyer stuck with it at all cost: they were motivated.