{"id":560749,"date":"2019-08-24T03:05:15","date_gmt":"2019-08-24T07:05:15","guid":{"rendered":"https:\/\/vrbbd.wpengine.com\/vrbbgreenbay\/dealing-with-inexperience-can-ruin-the-deal\/"},"modified":"2022-01-31T12:41:55","modified_gmt":"2022-01-31T17:41:55","slug":"dealing-with-inexperience-can-ruin-the-deal","status":"publish","type":"post","link":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/dealing-with-inexperience-can-ruin-the-deal\/","title":{"rendered":"Dealing with Inexperience Can Ruin the Deal"},"content":{"rendered":"
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The 65-year old owner of a multi-location retail operation doing $30 million in annual sales decided to retire.\u00a0 He interviewed a highly recommended intermediary and was impressed.\u00a0 However, he had a nephew who had just received his MBA and who told his uncle that he could handle the sale and save him some money.\u00a0 He would do it for half of what the intermediary said his fee would be \u2013 so the uncle decided to use his nephew.\u00a0 Now, his nephew was a nice young man, educated at one of the top business schools, but he had never been involved in a middle market deal.\u00a0 He had read a lot of case studies and was confident that he could \u201cdo the deal.\u201d<\/p>\n

Inexperience # 1<\/b><\/strong> \u2013 The owner and the nephew agreed not to bring the CFO into the picture, nor execute a \u201cstay\u201d agreement.\u00a0 The nephew felt he could handle the financial details.\u00a0 Neither one of them realized that a potential purchaser would expect to meet with the CFO when it came to the finances of the business, and certainly would expect the CFO to be involved in the due diligence process.<\/p>\n

Inexperience # 2<\/b><\/strong> \u2013 It never occurred to the owner or his nephew that revealing just the name of the company to prospective buyers would send competitors and only mildly interested prospects to the various locations.\u00a0 There was no mention of Confidentiality Agreements.\u00a0 Since the owner was not in a big hurry, there were no time limits set for offers or even term sheets.\u00a0 It would only be a matter of time before the word that the business was on the market would be out.<\/p>\n

Inexperience # 3<\/b><\/strong> \u2013 The owner wanted to spend some time with each prospective purchaser.\u00a0 Confidentiality didn\u2019t seem to be an issue.\u00a0 There was no screening process, no interview by the nephew.<\/p>\n

Inexperience # 4<\/b><\/strong> \u2013 The nephew prepared what was supposed to be an Offering Memorandum.\u00a0 He threw some financials together that had not been audited, which included a missing $500,000 that the owner took and forgot to inform his nephew about.\u00a0 This obviously impacted the numbers.\u00a0 There were no projections, no ratios, etc.\u00a0 This lack of information would most likely result in lower offers or bids or just plain lack of buyer interest.\u00a0 In addition, the mention of a pending lawsuit that could influence the sale was hidden in the Memorandum.<\/p>\n

Inexperience # 5 <\/b><\/strong>\u2013 The owner and nephew both decided that their company attorney could handle the details of a sale if it ever got that far.\u00a0 Unfortunately, although competent, the attorney had never been involved in a business sale transaction, especially one in the $15 million range.<\/p>\n

Results<\/b><\/strong><\/span> \u2014 The seller was placing almost his entire net worth in the hands of his nephew and an attorney who had no experience in putting transactions together.\u00a0 The owner decided to call most of the shots without any advice from an experienced deal-maker.\u00a0 Any one of these \u201cinexperiences\u201d could not only \u201cblow\u201d a sale, but also create the possibility of a leak.\u00a0 The discovery that the company was for sale could be catastrophic, whether discovered by the competition, an employee, a major customer or a supplier .<\/p>\n

The facts in the above story are true!<\/p>\n

The moral of the story \u2013 Nephews are wonderful, but inexperience is fraught with danger.\u00a0 When considering the sale of a major asset, it is foolhardy not to employ experienced, knowledgeable professionals.\u00a0 A professional intermediary is a necessity, as is an experienced transaction attorney.<\/p>\n

Copyright: Business Brokerage Press, Inc.<\/a><\/p>\n

Nyul\/BigStock.com<\/a><\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The 65-year old owner of a multi-location retail operation doing $30 million in annual sales decided to retire.\u00a0 He interviewed a highly recommended intermediary and was impressed.\u00a0 However, he had a nephew who had just received his MBA and who told his uncle that he could handle the sale and save him some money.\u00a0 He […]<\/p>\n","protected":false},"author":2,"featured_media":560751,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[3,8,2],"tags":[],"class_list":["post-560749","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-seller-articles","category-seller-faq","category-selling-a-business"],"blocksy_meta":{"styles_descriptor":{"styles":{"desktop":"","tablet":"","mobile":""},"google_fonts":[],"version":6}},"_links":{"self":[{"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/posts\/560749","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/comments?post=560749"}],"version-history":[{"count":0,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/posts\/560749\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/media\/560751"}],"wp:attachment":[{"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/media?parent=560749"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/categories?post=560749"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbgreenbay\/wp-json\/wp\/v2\/tags?post=560749"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}