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Why deals don’t close

After years working in M&A, it should be noted that in the Small Business sector (we define it as businesses under $10 million in sales), there has been an almost equal number of deals that don’t close, as successful sales and ownership transitions.   

SME owners are often personally attached to their business and can lose sight of their end goal, which is to receive reasonable compensation for their business and move on to new freedoms and interests.     

Specifically, some deal-breaking situations we’ve experienced are: 

  • A gap in expectations on the sale price and/or structure of the payout, with one party being inflexible in their position; 
  • Personality clashes, where one party takes offence during negotiations and wants to win points rather than find compromises; 
  • The seller gets cold feet and is fearful, second guessing what the future will hold;  
  • The buyer gets frustrated and apprehensive from negotiations that are overly aggressive; and 
  • Family interference – resisting the owner’s sale of the “golden goose” and not acknowledging the stress, time commitment, and risks from delaying transitions. 

Being part of a deal that falls apart is a tough experience for all involved. Finding a buyer that has the resources, skills, and interest in making the commitment to it is a significant challenge.  It is important to work hard at compromise during negotiations and finding middle ground to successfully complete the transaction. 

The solution is good, open communication, and this is where an experienced intermediary is vital.   Getting to the root of the concern and understanding each party’s perspective is critical to be able to move the deal forward to successful conclusion.