Episode 35: Sell Side Short on Why Deals Fall Through

So a very high percentage of transactions that go under LOI don't actually close.

And the reason for that is up to the LOI, your sell side advisory team is telling a story about your business and the financials tell that story.

Your employees tell that story, the history of your business tells that story.

And we really wanna put the best face on it that we possibly can to generate interest from these buyer groups.

But a very important part is that, In the end, everything will come out.

So if there are warts, we need to address them early and make sure that people are very clear on what they are.

And as we do that, as we build the story of your business, we want to make sure that when we talk about the warts, we talk about corresponding high points that can mitigate those warts.

Because at the end of the day, this is a risk discussion between the buyer and the seller.

And the buyer is very concerned with what the risk is of this investment going south.

But we have to disclose it because surprises really are the deal killer.

Just kind of some key thoughts of things that sometimes aren't disclosed but when discovered during pre-sale due diligence can cause major problems or revenue concentration issues.

I would hope that your sell-side advisory team has made it very clear.

I mean, one of the main slides in the confidential information presentation is what your revenue concentration is, what percentage of your revenue does your top customer take up, and then the next five and the next 10.

And we want to see a really good spread there.

Oftentimes businesses do have some amount of revenue concentration, and that's okay, but it has to be disclosed.

We want to make sure that the buyer's well aware of what they're getting into when they submit the LOI.