The Best Business Deals Die Three Times: Wisdom from Buying & Selling Businesses

Business Deals Die Three Times

All business deals are complex, especially purchase and sale agreements. The best business deals often die several times!

Business Deal Reality Check

“The best business deals die three times,” is sometimes said with the reverence of having been spoken by a person of great wisdom.  This week, I spent days in full-time discussions with a company where we are far along in the due diligence process and it is unclear if we will get over the finish line to make the final deal work for them and for me.  It is a difficult, frustrating, and time intensive process.  Furthermore, it usually isn’t a glamorous business.  For several sessions, we were squatting in a hotel banquet / storage room with laundry bins, uncleared tables, and minimal air conditioning in a hot, humid part of the country.  Other times, we were at a business owner’s home with the plumber drilling holes in the wall and interrupting our conversation.  My world is not one of plush, fancy hotels and catered lunches in white-shoe law firms.

Some observations from the front-lines this week:

  • Something in human nature isn’t satisfied with a big decision until everyone is convinced they got the most they could.  This becomes even more true when selling a business with a lot of money involved and the owners are at the end of their career with no more deals on the horizon.  Most deals have to have people walk away at some point for the participants to become convinced they got the most they could get.  That is unfortunate, in my book, and wastes a tremendous amount of energy and time.  It really bums me out, actually.  I would prefer much less posturing and more straightforward conversation, but that is very difficult for people who do not have a long-term relationship and the stakes are high.
  • It is important to negotiate with someone who has confidence to make decisions.  This week, I became convinced that one participant didn’t have confidence to make the decision — the negotiation could go on forever because the person was too nervous to make a decision.
  • Rational decision-making does not rule the day.  A perfectly rational decision becomes unattractive when surrounded by emotion, expectations, and other less rational factors.
  • Finding common ground is difficult with different backgrounds.  People often have different depths of knowledge on accounting, business valuation, and the business deal process that makes finding common ground and a common view of the world very difficult.
  • Value creation in a deal process is vital; and can only happen when everyone considers new and different ideas.  The key to many business deals is to find the trade-offs that create value for each party.  To do that, you need to have an open dialogue about what is most important and what is not important to each participant.  And, you need to consider creative ideas that you may not have considered before (see the point above about someone having confidence to make a different decision than what they may have thought about for months and years previously).
  • Business owners need to understand how intensive the selling process is — it is basically a full-time job.  It is so important for business owners to pick a time to sell when they can dedicate the time to sell.   And, they need to realize that their business needs to be able to run without them while the sale process is happening.  This adds an unbelievable amount of stress to business owners because the selling process is stressful and then they have the stress of keeping their business on track.

There is wisdom in the phrase “the best business deals die three times” because both parties will keep coming back together to make a great deal work, even after the business deal dies once or twice.  For bad business deals, it just isn’t worth it to come back together.  This week, a business deal I liked died — time will tell whether it comes back together.


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