Will your advisors kill your deal when selling your business?
Imagine you are selling your business. Imagine you have agreed to a price and terms with a buyer. Then imagine you learn that the buyer wants an escrow to cover some potential legal liabilities (this happens all the time, by the way), and your advisors take issue with that.
This is not an imaginary story. In fact, I have heard it before. Normally this all gets worked out with some give and take. It takes experienced advisors, who have done this before to give you (the seller) the right advice so as not to get taken, but as importantly to not kill your deal.
Now imagine you have an offer to purchase your business of $20 million, with the escrow of $1 million for said legal liabilities. $20 million is way more money than you ever dreamed to have when you started your business many years ago. You start thinking of the ways this money will help you and your family, how you will reward loyal employees who carried you through the worst of the Covid 19 pandemic, and how you will help fund charities you support.
BUT you do not have a highly experienced lawyer and accountant (your primary advisors). You are their largest client – by far. Losing you will be hard to replace, especially given the uncertainties in the 2022 marketplace. They start to question the amount of the escrow, then the timing, then the way the bank wires will be handled. The list goes on and on.
Doubt starts to creep in on your part and on the buyer’s part. They doubt your sincerity. They see you as a person in their 70’s who is too emotionally tied to the business and is using the escrow as a smokescreen. You get upset and say something regrettable. The deal is dead.
So, who killed your deal? Some might argue the buyers being unreasonable (your primary advisors would). Others might say that you were in fact too emotionally tied to the the business. I disagree. In the end, your advisors killed your deal. Why? Because if they really respected you, they would have admitted their inexperience and helped you find other advisors to guide the process to a successful close. Because they consciously, or subconsciously, let their fear of losing your business cloud their judgment. Because they would have sensed your emotional state and helped you speak with an advisor who could help you manage your emotions; someone to help you envision a fulfilling life beyond the business (and $20 million to fund it).
Business owners get blamed for killing their deal all the time. I don’t buy it (pardon the pun). Great advisors are humble enough to know when they need to get help. Great advisors know how to ask the questions that get to the nub of the issues. Great advisors never let a good deal die. Longtime advisors who are out of their league, can kill your deal. Smart business owners keep pushing themselves to find great advisors. It is hard to tell an advisor that they are not the right one for you. That can be a primary challenge when selling your business.
You only get to sell your business once; hiring the best is not cheap, but a lot less expensive than killing your deal.