M&A Murders & Accusations: The Good the Bad and The Ugly of Selling Your Business

Survive the Sale: The 7 Deadly Killers of Selling a Business with Guest Peter Christman

• Rick J. Krebs, M&A Advisor, CPA and CEPA • Season 1 • Episode 4

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There are 7 things that can definitely kill the sale of your business. You will learn how to avoid these and NOT kill the sale of your business. We get into the ugly side of things here with over 50 years of combined M&A experience, Peter Christman and myself share horror stories we've seen.  Get better prepared to sell your business by listening in to this episode.

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Peter Christman

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Survive the Sale The 7 Deadly Killers of Selling a Business with Peter Christman 1.mp3

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Hello and welcome to M&A, murderous and accusations. The good, the bad and the ugly of selling your business. We dig into what you need to know and how not to kill the sale of your business. Now here's our host Rick J Krebs, mergers and acquisitions advisor.

Hello everyone and welcome to show today this is Rick J. Krebs, M&A cowboy talking about murders and accusations. Don't kill your deal. So today we're talking about 7 things that can totally kill your deal. I can send you. Death certificate for every one of them. I've seen things I've seen. These things happen. I've seen them impact transactions. So I want to make sure that you're aware first is poor record. If you have. Financials that are not up to snuff get you a good CPA and get your financials in order and get your records there. If you don't have good records, it puts you in a weaker. Bargaining position. With your buyer, plain and simple, you just don't know enough and times. A weaker value. So get your books up to order up to snuff. Them where they should be next thing. Is selling when your revenues are plummeting and they're going down. Don't sell when you do that because you can sell. I've sold those companies. However, you're going to get less of a selling price. Simple as that. In the business we call it catching the falling night and that means people. Don't want to catch the falling? Why does it catch your hand, right? You don't want to catch the falling. If the buyers don't want to either so sell on the upswing, #3 failure to maintain confidentiality. So. Anytime you have a buyer that comes to you and unsolicited offer a buyer approaches you don't give them anything. Make him sign an NDA. Non-disclosure agreement confidentiality agreement if you need one help on my website, shoot me an e-mail. I'll send you one you can use, but you absolutely want to make sure you block people and you don't breach that. Confidentiality employees can find out. I heard about a transaction one time that that one of the employees found out and they put up on the poster board and went sure that that the company was for sale immediately. Everyone will just blew up on him. They had to do damage. That's the last thing. And new exiting, mentally checking out of your business. If the gas is blinking on your tank, you've gotta get that thing sold before you mentally check out of the business. When you check out the employees, check out and you just see that business start to plummet, so you gotta get it to. And so before that happens, you. Got to plan that exit and you got to. You know, get there, we can. Sell it but. You just don't get optimal selling price. It's like the vultures are circling and buyer vultures and they. They smell blood and then they're totally at you with lower prices and end up selling for lower than you really. Good and making big purchases without consulting your advisor, that's number five. So I tell all of my business, sellers run your business like you're never going to sell it and that's hard to do. Easy to say. Running like you're never going to sell it. You know, you get a new. Slide you're about ready. To close and you see, you know you see those dollar signs and not have half of them spent, but know that transactions can unwind at any time. I saw one unwind after seller and misrepresented a bunch. Of stuff and lied to the buyer. Was like you're gonna unwind this thing, or I'm gonna send you to jail. So you've got to make sure that you run it like you're never going to sell it up through the closing date. The reason I say that is. You've got to make big purchases if you're if you're forced to make a big purchase through the selling price. Talk to your mom and the advisor before that or your broker. Make sure you plan that if it's after an allow you to talk to the buyer and it's after an alloy. Oftentimes that you can add it to the purchase price and get the buyer to pay for it, but if you don't talk to you're a little bit Sol and then you know. What? Sol it's already. Have luck. You don't want me to or you make big. Equipment purchases talk to somebody. Talk to your broker, talk to an advisor to make sure that he can get you that money for them. Before you already spend it. OK, number six, don't list 2. I'm selling price. We see this a lot. We see a lot of business owners out there. Not a lot, but. A fair amount of brokers that you just slapping crap up against the wall opening and stick. You know, asking a business owner, what do you think your business is worth about 10 million bucks? OK, that's what we're asking for. You know, they don't do a formal evaluation. They don't take the time to look at what it truly should sell for. They just throw it out there high open. It will stick so. Don't do that because it makes the. Other businesses that ever sell look better. Then yours. The last thing you want to do. Is make everyone else. Look better than you do. So price it reasonably. Get it out there and get it sold. #7, they're there to hire the right brokers or even many people. Or advisors or attorneys or Cpas. Your attorney, your CPA, can kill your deal faster, and you can blink. And I, and sometimes it's well-intentioned people that do it like oftentimes it's well-intentioned people would do it, but they're better at killing them than they are keeping them alive. They don't know how to do CPR in a transaction. They don't know how much work goes into it. They're just telling clients, making them afraid. And so you gotta get the right people out there on your. On your. And when I say right people, how do you know that they're the right people? How do you know your attorneys the right person? Simple question. When you're shopping for an attorney, you ask them how many transactions have you done of this size in the last year. If they haven't done, at least 2GO find someone else. A lot of people say they do and they work. Or business selling work. And how they do it as they learn from your transaction. It is to run from that and that's how they do it. We were involved in it, you know, sale a few years back and the attorney was picked by my seller and it was a good high school buddy of his and. And we're sitting in the negotiations. And we got to.

A sticky point.

Right. The buyers wanted something we wanted. Some attorneys were back and forth, kind of walked up like 2 little bulls in the past. You their horns were locked. And I said hold on just a minute. We put it on pause and they had to turn in and said, you know what, this isn't rocket science here. This should be one. There should be some wording in one of your past contracts. It's just normal. Stick it in. Let's get over this and get this thing done. But Turney looked at me and said, Rick. Like, did you know? I want divorce attorney. This is the first business sale. I've ever done. I could have died. I was like what? No way or 3/4 of the way through and and the buyers attorney had a whole bunch of problems with our attorney. They were telling me about it bending. My ear all. Day I'm like now right now they. Didn't know how things were done. And ironically, that attorney was only like $300.00 an hour. The other attorney we were dealing with was. Beverly Hills attorney. It was 1000 bucks an hour and my buyers, I I would swear on it. They paid less in attorney fees than we paid because they had a deal. Guy that knew what he. Was doing, he charged a lot per. Hour. But he knew what. He was doing, he got the thing. Done so, get the right people. On your team, make sure they're deal guy. Just make sure that they know what they're doing. If you're gonna win the Super Bowl, you gotta have good players. You gotta have good players on your team, so those are seven things that can kill your transaction and now you know, so you don't murder your deal. And I am so happy today to have Peter Christman with me on the show. A little background about Peter. I had heard about pain. Later or many months before I got the opportunity to meet you, I. Don't know if you know that, but. What the hell? You know, you're a legend. You must have been in the post office. Side by side most wanted, so I'd heard about. Peter. But he's a legend in the M&A exit landing space. And the reason I. Say he's a legend is. Back in the early 90s, he. Wrote this little book. What was he? What was? He near 9293. Well, that no, it was in that a little bit later than that and I. That that book is the the basis of my whole ever playing model right there in that book, you know? So in the 90s, Peter started talking about exit planning before anyone was talking about exit planning. Is I want to say the founder of the notion of exit planning. People were just transactional back then all they wanted to do is just close the transaction and move on. But Peter brought up the idea of exit planning and the need to plan for an exit. So he wrote this book. So what was it that precipitated? The the writing of this book. Well, wait, I the the book was created for several reasons. One is I I wanted to. One of the biggest things in exit planning were. I I've never liked the term exit and that's why I put master planning on that book. It's exit exit planning. The exit ramp to a lot of issues from the confidentiality point of view, business owners will will see about that subject and so forth. So I thought master planning was really a term I want to use. But the problem. Was the industry was using that term? So I I said OK, I will. Use the term exampling. And to answer your question, this book is designed. The main design is is is the to educate the business owner on what this whole thing is about of estate planning or or master planning. The second purpose of this book. Is that so? Advisers could use something to be productive. In their prospecting were clients that they would like to obtain and to put them through their supply process. So what I recommend to to and what's been very effective productive. Is that business advisor would have prospect would give the prospect this book and I'd like to add you, Rick, I'd like to have you read this book on. But I ran into. I read it myself, but I saw it. And you know what? What seemed better? I think you're gonna find any more forward than I did. So as you can see from the book, it's not very big. But there's not. Going to be very big and it's got large and font because that's older people, you know, like where they're font. So take a look at. That what if? I gave you this book then and. You read it. And what I'd like to do is get back together again after you have. So uh, today is the Tuesday. What about the maybe 10:00 o'clock next Tuesday? How's your schedule looking for? That great prospecting tools that. OK. So let's you know. You you've already confirmed. That you're gonna meet with me. Next Tuesday at 10. OK, so yeah, that's how an advisor. Use the book. In Prospect now what happens? You get together with your your prospect and in a week or two, whatever time they they give me and now you got with sore of information. With which to start new discovery process. And we just sit back and boom, boom. Just find your questions and then and the other thing is you gotta shut up. I sit with so many advisors that ask questions and they don't shut up and tell me if listening is one of the greatest skills that you can have in this. And the more you listen, the smarter you get with that client. I love a soul. Think the way the more you listen, the smarter you get. So anyhow, that you you asked about the book I gave you your question about the. But those are some of. The reasons why I I wrote. The segment is on the seven deadly things that can kill your business sale. Hi everyone and welcome back to the show. The podcast M&A and murderers and accusations brought to you by the Heber City M and a cowboy Rick, Jake Crabs. And thank you for joining us. That I am pleased to announce my guest, Peter Christen, a legend in the space of exit planning and selling businesses the business for many, many years. He's probably forgotten more than I know. But I'm so. Glad to have Peter here. I have forgotten you're right. And as you can tell, just a great man. We're talking about the seven deadly sins that or I call them, seven deadly things that can kill your business sale. And I'd like to, I'd like to have. You share with us. Peter, what are some things that can kill us? You have a lot of experience selling companies and doing exit planning. What have you seen that that could chill the sale? And there's so many things that could kill the sale. I I think starting out the one of the one of the biggest things is that if the owner didn't know. The owner doesn't. One can't picture himself in the moonlight. After they exit their their business and their business, it ain't going to happen. My experience is showing that that you better remember that this is their baby. This is the thing they get up every morning, floor, show up for they're they're the. They're they have a certain position in society and run the business and so forth and it's a it's going to be a new right and they've got pictures of themselves in that new right. If they can't, I don't care. Ohh Russia offers are and so forth. You're not gonna move. And I honestly think that that's. That that is one of the biggest things. What kills a deal if they got, they got pictures of that new life and so so. And I could talk about how you get there, but I I. Want because you asked for seven? So hold on. 2nd we go to that. Excellent, I found that as well. If the seller isn't motivated to sell, you know, selling a company is a is a bit of a bumpy road and they're going to be roadblocks. They're going to be. You know, I'm selling a company right now and we had an issue pop up and and we joke in the business that the deal has done lying three times before it closes, right. There's all kinds of, yeah, all kinds of things we can't even begin to tell you. What pops. You know, just things as part of the transaction, but if the seller is not motivated to work through those issues and to work through those, those concerns that a buyer might have or whatever it may be, then the deal is. Not gonna close. I love that one. Thank you and. And I would say on. The other side of that. You have to have a motivated buyer. These buyers have to be willing to go and and the ones that have closed that I've. Seen that we work on. You have a motivated seller, seller and motivated buyer and then it can happen. But if they're not that motivated, they're just kind of toe dipping right versus diving in. Then they don't have the the driving the initiative to to work through these problems or work through an issue or a concern to get the deal done. Love that one, OK. Go ahead. I tell you what. The the the server. The vision. And I told it. Because the risk of getting involved in the sales campaign. And and not dipping your tool as you say. That the risk were too great. One the risk of confidentiality. The risk of getting out into the marketplace that the companies for sale. The risk of employees growing that the businesses for sale the process. It's just way too important to toe that you can't do it if you're not committed. I don't want to do business with you and you shouldn't do business. With me or anybody. That's OK. You know, that's right, you fully committed. Then the test, because if not. If, if not, if it's not done the right way, you're going to decrease the value of what? Yeah, we wanna do that. Absolutely. Yeah. And we wanna. Do the opposite. Increase the. Value of what you have and you. So sell it like you mean it. That's my take right then. Right then. And then sell it. Sell it like, exactly. There's so many. There's so many issues. And you, you discover on your what one of the parents things you have to do is win the business or is the business. In other words, if if, what would add that business if that business order that and that's one of the things that buyers are looking for as to what effect the answer to that question would at for the deal. And I say that that's part of again, I'm talking about issues, but then? Those issues have to be addressed. And and. The discovery process, which is your first step in in any step, is so important. Because you have got to. We need to develop their confidential business review. We gotta be entirely honest with what's going on. There's no no PS's, right? That you that talk about the good and that talk about the bad and the ugly. Tell you what that? Is gonna be the whole blueprint. Were due diligence and documentation. Later on the sale, OK. The other thing you gotta make sure your your client is really telling the truth. This I'll tell. You what? They're not good at bias and they can't remember they're BS. So you better make sure that they're being honest with themselves. With the, with the buyer, during the buyer showings and so forth. And and you know, he's buyers are very sophisticated. He's well, well, how a lot more sophisticated in the process than the than the. Client is and more experienced. Right, exactly. More experience. And if a client, one of the things we do is educating the client. They're gonna go through in the snow process, they're gonna be dealing with some very smart people who went in that BS. OK. And so we'll be perfectly honest with them and one of the things other things were were showing. Is the future of that business. With a new person or company in charge of it. Writing it and then show them how they can take this business. And do certain things and be more productive in what the business is. Right now? Well. That's what you're talking about there with the with the sellers being less experienced in the transaction and the buyers being very experienced with transaction. I was a little kid when he played. Tee ball. Many of their legs, softball or baseball. I was. I was playing with four tee ball, but he played baseball in college. So I though when you I remember we were in a Little League team and we had this one guy named Quinn. And he was one of those guys. I think we were about ready to meet puberty, you know, 1213 years old. Yeah. And there's always that. Kid, that that's 1213 years old. That's 6 foot tall and that's a full beard. Right. This puberty, he hit puberty about 10 years old, and I remember he. Would stand up and pitch. And our whole team was afraid of that guy because his pitches were right and. Say that I don't know 70. Mile an hour fastball, you know, just and you step up to the plate. And when they throw one of those fast balls at you and it hit zings past you, you will hit you. That's you. Yeah, that's the way I've. Seen that with sellers. They don't realize that they're no longer in the little leagues, they they're in the Major League, right? Right. They don't want a business. And opposing they're dealing with pro. They're dealing in pros where they stepped to that plate. And that pitcher throws that 90 mile an hour fastball past them. They don't even know what to think right now. You now. And so and so I think it's really important to know what you're getting into and to surround yourselves with professional advisors, people who have been in the in the major leagues, who operate in the in the major leagues and know how to handle it and know how to give you. The coaching that you need. So that, yeah, that's. A great point. And that's that's really it's OK. In fact what I do or what I did, I don't do it much anymore. But I I would find out. The appliance advisors are in order. They're currently using. And then I would go out and interview with advisors. And I'd come back and say, hey, you know, sat down and be with Rick. I think Rick's gonna be very good by a lot of value in this whole this whole process. OK. Same Rick is the financial advisor, but again you can go out interview. Say what bread I had a point session with Rick your your train. But I have some concerns. Oh, what are those? Yeah, that's what you're supposed to ask. And then, yeah, it's like. And so Rick is a is a great guy. I've been your corporate attorney for. 25 years, so forth and so on, but. We didn't have any experience really selling companies and the people who are going to be dealing with are going to have maturities. Who are real pros? At buying companies, so we want to be on a perpetual basis with that. Yeah. OK. But I have a concern about Rick. His his sperm is not active in the MA business. And you see that all the time, where they'll engage you and learn the. And the business on your deal? Yeah, exactly. And the firm is not done hardly anything. Rick has not closed a deal in two or three or four years from, I think had one or two. Deals last year. So what I'd like you to do is and and that three people are living in in chat with who are experience, who I think are really gonna gonna do a great. Job for you? And if you decide to to go ahead and pick one of those, that what we will always keep Rick as your corporate attorney. So that in fact, to be honest with you, Rick will probably be feel better that you're bringing on a a real row bringing in that picture. Right, that that exactly. And they'll get her. That doesn't need to hit her. Right. And and and Rich will feel better and it'll be definitely a better. Job for you? Because we don't want to risk. Not having. Good attorneys on both sides of the deal. Great point, great point, Peter. So peter's. Given US 2. Or three things today that will kill your deal. We sure appreciate your time and appreciate you joining us today. Thank you. And and remember the name murders and accusations don't make you deal with murder and accusation. Kill the sale. Of your company, do it right. Thank you.

Thank you for attending our podcast. We invite you to join us for future episodes of M&A, murders and accusations. The good, the bad and the ugly of selling your business. You can also visit us at www.bsalesgroup.com or e-mail Rick directly at rick@bsalesgroup.com.

 

 

 

 


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