We say this a lot during our conversations with possible clients when they ask why deals don’t get done. And I know it is far easier said than done – to not let performance slip while we are going through the selling process. Sometimes things just happen. I know, I started, owned and ran a company for years.
But it does happen and it just happened again. We signed a letter-of-intent and things were looking good. However, when the seller produced a mid-year update, things no longer were looking so good. The frustrating thing is that he didn’t shrink, he just didn’t grow. Plain and simple, he didn’t do what he said he would do. When that happens, it does a few things. It changes the financial model that was built by the buyers and lenders that justify the price being paid (in this case there was an earnout, so that had to modeled in as well). It also brings into question the ability of the seller to produce a sales forecast for the current year.
In this case it killed the funding that the buyer had lined up. At least that is what he said, but he may well be taking a wait-and-see attitude himself.
This is a big reason why you use an intermediary like me in the first place – so you can focus on the business during the selling process and not get (too) distracted. I have to admit it didn’t quite work in this case. The seller is confident sales will be back in forecast range by the end of the year, and it is looking likely we’ll have to wait until then to make the buyers comfortable with the price that the seller wants.
compasspointcapital
com