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Where Deals Go Wrong and How We Prevent It

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Get your aromatherapy out – we’re about to do a business deal.

Buying or selling, no matter the size of the deal, the pain points can be the same across the board.

The best approach?

(Well first, get a good business lawyer.)

Then, focus on these 3 areas:

1. Setting expectations at the LOI stage

We find lots of buyers and sellers rush the Letter of Intent stage because they are so eager to lock up the deal.

But the LOI, non-binding as it may be, is the best place to get everyone on the same page, reducing the likelihood of an impasse later.

Need a financing contingency as the buyer?

Put it in the LOI.

Want to claim accounts receivable post-closing as the seller?

Put it in the LOI.

2. Due diligence surprises

The LOI is signed, the sale agreement has been negotiated and you are days away from a potential closing.

You’re combing through the financial statements of the company you’re about to purchase, and surprise!

That healthy 50% margin that was promised?

Turns out it’s actually 19%.

Start your financial due diligence early and bring a great CPA on board your deal team so they can use their expertise to weigh in on the health of the business.

3. Lease Woes

Landlords are often last to know when there is a business sale.

Presented with a new prospective tenant, we find them less than enthusiastic. It can become a stumbling block at the 11th hour if the landlord won’t sign off.

Why the lack of cooperation?

Well, first off, they aren’t incentivized.

What are they getting out of the deal? The unknown of a new tenant?

The loss of their original guarantor?

Looping in the landlord early in the process and getting their support is essential.

Help them understand why the successor is a strong substitute.

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