June 29, 2020

How Buyer and Seller Chemistry Created the Deal Dynamics where 1 + 1 = 3

A founder of an IT based company had an unrealistic expectation on the valuation of his business solely based on his internet research. The business was most likely overvalued as much as 75% to 100%. How this potentially deal breaking fact was negated when buyer/seller chemistry created a situation where 1 + 1 actually equaled 3.

A $12M revenue company, with five equal owners, never could come to a mutual agreement on the urgency and the reasons to exit their business. While they all agreed to sell the business, they had completely different motivations and reasons for selling the business. This ended up driving six highly motivated strategic buyers away from the table. Without a consensus, the deal was abandoned due to the hopelessly divided opinions of the owners.

An ESOP – Employee Stock Ownership Plan and how an owner’s illness caused a huge drop in the value of the business and consequently the valuation of the ESOP. This ultimately ended in the termination of the ESOP when the business was sold.

A founder of a business, who absolutely loved what he did, was forced to sell his business because of pressure from family. The importance of structuring a business becomes evident to allow for either a transition where there is a meaningful life after their exit or that your business can operate without you.

Bill Vinck
Chapman Associates
Scottsdale, Arizona
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Podcast: Play in new window | Download (Duration: 46:37 — 42.7MB)