Remember when you were a child and your mother told you not to touch the hot stove? You couldn't really appreciate that message until you felt the pain shoot through your entire body by way of your finger tips. Oh, now I understand. Sometimes our prospective business sellers get the same kind of message as they pursue the sale of their business to a buyer who approached them with an unsolicited interest to buy.



We often get an inquiry from this business owner because this is usually the only time he will sell a company. He wants advice from us and his position is that he will hire our firm to represent him if this buyer falls through. Really the best advice we can give him is to engage our firm and let us throw this buyer into the mix of potential buyers that we will uncover. His response is almost always, I just want to see how this buyer plays out. We have watched this movie that I will call the Single Buyer Syndrome, a hundred times, so let me describe how it plays out.

?The potential buyer begins an exhaustive courting and informal due diligence process without any offer or Letter of Intent.

?The owner takes his eye off the ball, counting his millions prematurely and devotes less attention than usual in running his business.

?The buyer draws out the process by delaying and rescheduling meetings. He does not treat this process with the same focus and sense of urgency that the seller is now consumed with. Do you know why? The buyer is doing the same dance with 3 or 4 other prospective acquisitions.

?The seller has a difficult time getting the buyer to put some terms and conditions in writing. If he does, it provides a good deal of wiggle room to adjust his offer as due diligence progresses.

?The process seems to stretch on and on as more meetings get delayed and rescheduled.

?Finally, the seller gets aggravated and begins to put some time limits and demands on the buyer.

?The buyer now gathers his team of accountants, attorneys, operations managers, and others to tear apart your company.

?This team finds all kinds of problems that they use to justify lowering the offer and increasing the reps and warranties and increasing the amount of hold back in an escrow account. They also bring up the requirement for owner financing for the first time.

?The buyer has carved a significant chunk out of his offer while using all his experts to back him up. The seller is now 6 months into the process and the buyer knows that you have a great deal of skin in the game. He is counting on the seller to just cave and weakly counter because this process has just worn him down.

?If the seller relents, he likely has had his original offer reduced by 20% or more. The original offer, however, started below what the business was actually worth. If he sells under these circumstances, he likely will realize 30% or more below what a fair market competitive bid situation would produce.

?The other response from the seller is to be insulted and blow up the deal, leaving his company in a weaker state than when this whole process began. The seller focused much of his own energy on this process rather than running his business.

?The buyer moves on to his next acquisition candidate with the same M.O.

Unfortunately, the story does not end here. Many owners will go through this process more than once. It can stretch on for years because he can normally process only one buyer at a time. The only way to insure the right selling price is to throw these buyers into a formal M&A process. When you do, these buyers usually drop out of the running pretty quickly because they want to find a bargain. You worked too long and too hard to suffer from Single Buyer Syndrome and sell your company for a discount.