For every negative reason the pending sale of a business collapsed, there is a positive reason why another sale closed successfully. What does it take for the sale of a business to close successfully? Certainly, there are reasons a sale might not close that are beyond anyone’s control. A fire, for example, the death of a principal, or a natural disaster such as a hurricane or tornado. There might be an environmental problem the seller was unaware of when the decision was made to sell. Aside from these unplanned catastrophic events, deals fall through because of the people involved. But this post will focus on examples of when (and why) they close successfully…because of the people involved.
The Buyer and Seller Agree from the Beginning
In too many cases, the buyer and seller really weren’t in agreement, or didn’t understand the terms of the sale. If an offer to purchase is too vague, or has too many loose ends, the sale can unravel somewhere along the line. However, if the loose ends are taken care of and the agreement specifically spells out the details of the sale, prior to the offer to purchase, it has a much better chance to close.
In this case, a lot of answers and information are supplied prior to the offer and many of the buyer’s questions are answered before the offer is made. The seller may also have questions about the buyer’s financial qualifications or ability to operate the business. Again, these concerns should be addressed prior to the offer or at least, if they are part of it, both sides should understand exactly what needs to be done and when. The key ingredient of the offer to purchase is that both sides completely understand the terms and are comfortable with them. Too many sales fall apart because of a misunderstanding on one side or the other.
The Buyer and Seller Don’t Lose Their Patience
Both sides need to understand that the closing process takes time. Numerous details must be addressed for the sale to close successfully. If the parties are using outside advisors, they should make sure the advisors are deal-oriented people. In other words, unless the deal is illegal or unethical, the parties involved should insist the deal works (and not be derailed by the advisors).
The buyer and seller should understand that the outside advisors work for them and that most decisions concerning the sale are business related and should be decided by the buyer and seller themselves. The buyer and seller should also insist that the outside advisors keep to the scheduled closing date unless the buyer and seller – not the outside advisors – delay the timing. Prior to engaging the outside advisors, the buyer and seller should make sure their advisors can work within the schedule. However, the buyer and seller have to also understand that nothing can be accomplished overnight, and the closing process does take time.
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There Are No Surprises
The seller has to be open with information about the business being sold. Nothing is perfect and buyers understand this. Any weaknesses should be revealed at the outset because sooner or later they will be exposed. For example, the seller should consult with an accountant about any tax implications prior to going to market. The same is true for the buyer. If financing is an issue, it should be mentioned at the beginning. If all the concerns and problems are dealt with initially, the closing will be just a technicality.
The Buyer and Seller Both Believe They Got a Good Deal
If the buyer and seller both believe their goals are met by the transaction, the closing should be a simple matter. If the chemistry works, and everyone understands and accepts the terms of the agreement and believes the sale is a win-win, the closing is a mere formality.