The top 10 deal breakers in a business sale include three situations in which an adviser plays a disruptive role. This is the most remarkable outcome of a joint study by acquisition platform Brookz and the Lectoraat Financieel-Economische Advisering of the Hogeschool Utrecht.
The study "Dealmaker or Dealbreaker?" was conducted among 547 acquisition advisors who are active in SMEs and involved in transactions between 0.5 - 30 million euros. The aim of the survey was to find out why over 30% of potential sale transactions ultimately do not go through.
Trust between buyer and seller
The obvious "Buyer made too low an offer" was cited most often as the main reason why business sales fell through. But right behind that, the second most important reason cited was "Adviser of the other party had created too high expectations. In addition, in the top 10 deal breakers, there were two other reasons in which advisers blamed each other: in fourth place was 'Adviser of the counterparty did not have sufficient knowledge of the business' and tenth was mentioned 'Advisers of the buyer and the seller did not come to an agreement between themselves'.
According to Floyd Plettenberg, partner at Brookz, research shows that a deal breaker rarely occurs alone. It is often a confluence of circumstances. Plettenberg: "A lot can be traced back to a lack of trust between buyer and seller. And that is precisely where advisers can play an important role: first by bringing the right parties together and then by managing expectations about the value of a business.'
Specific knowledge
Dr. Lex van Teeffelen, HU Lecturer in Financial-Economic Advising, is pleased that it appears that the majority of advisers do not shy away from smaller transactions and deals with foreseeable problems.
Van Teeffelen: "That explains why the success rate per portfolio varies between 50% and 90%, because not every adviser accepts those assignments. In addition, we see that the industry has made a quality shift in recent years. Home consultants who just do it on the side are encountered less and less. The profession requires specific knowledge and a lot of practice.
Top 10 Deal breakers in a business sale
- Buyer made too low an offer.
- The other party's adviser had created expectations that were too high.
- Lack of trust between buyer and seller.
- Advisers of the other party had insufficient knowledge of the business.
- Inadequate preparation by the seller.
- The selling party turned out to be too dependent on a few clients.
- Financing from the buyer was not forthcoming.
- Unexpected results during the due diligence.
- Selling party could not let go of the business.
- Advisers for the buyer and the seller did not come to an agreement.
Source: Brookz Utrecht
