12 Jul How to Keep Deals from Falling Apart
Greg Kells of Sunbelt Canada spoke during our recent webinar, “The Closing Process-Preventing Deals from Falling Apart.” He covers key points learned throughout his distinguished career. In our previous article, we covered the role of human psychology in the process. The simple fact is that so much of how you interact with buyers and sellers revolves around dealing with and understanding human psychology. In this article, we’ll dive in and explore more ways to “defend the deal.”
Set Up a Solid Foundation
One core element in defending the deal is to begin with a solid foundation. In Kells’ view, a qualified buyer is a key part of creating a solid foundation. Factors such as understanding why a buyer is interested in owning a business and testing their financials are key aspects of vetting a buyer, and in the process, working to defend the deal.
Understand the Financials
Another key path for defending the deal is to, as Kells notes, “Understand the terms of the bank financing that you’re going to secure. You have to put the right package together to get it approved by the bank.” And to this point, if you feel that you are not capable of putting together the financing, then it is vital to seek assistance even if that means having to work with another brokerage firm.
Kells noted, “Before we start due diligence and closing, I want to get an assessment, not a commitment, in which the lender looks at the deal and likes the terms.” Additionally, Kells feels that it is vital to know the other parties in your community and have a relationship with them.
Work with Landlords and Lawyers
There are many overlooked variables that can kill a deal. One overlooked “deal killing variable” comes in the form of landlords. Kells states, “Landlords can hold up your deal…So, I put together a great package for the landlord, which includes the experience and CV of the buyer, and the financials of the business.”
Lawyers are another potential deal killer that you must be aware of and take measures to guard against. Kells believes that lawyers will often push haggling too far, noting “My experienced is most of them play one-upmanship where they are trying to beat up on the other side. If you leave something that they can get their teeth into, something they can use to kill the deal, it may happen. I’ve had it happen.”
Other Twists and Turns
Your job should include looking out for unexpected twists and turns that can kill the deal. Kells brings up an excellent example of this fact, noting that environmental issues can kill deals. For this reason, Kells has the environmental inspection done well before going to the market.
At the end of the day, the buyer is assuming a lot of risk, so you must keep this fact in mind throughout the process. Buyers, as Kells points out, have “opportunity costs,” in which they are not just risking their money but potentially years of their lives as well.
Buying a business also means that the buyer is risking money they could have made working their current job. The process of buying and selling a business means that there is ample risk and that can translate to ample stress. Understanding the psychological implications of this stress and how it can influence deals is at the core of your position.
