What Makes a Deal Close?

What goes into successfully closing a sale of a business?  A sale may not close for various reasons, often beyond anyone’s control. For example, a fire, the death of the principal, or a natural disaster such as a hurricane or a tornado.  There could be an environmental flaw that the seller was unaware of when he decided to sell.  Apart from these unplanned catastrophes, deals fail because of the people involved.  Here are a few scenarios where a sale closes successfully:

The Buyer and Seller Are in Agreement From the Beginning

If an offer to purchase is too vague or has too many loose ends, the sale can unravel somewhere along the line.  However, if those loose ends are taken care of and the agreement specifically spells out the details of the sale, it has a much better chance to close.  This necessitates that an extensive amount of information and answers are supplied before the offer and that many of the seller’s questions are answered before the offer.  If a seller has questions about a buyer’s financial capabilities or their capability to operate the business, these must be addressed prior to the offer.    The key ingredient of the offer to purchase is that both sides completely understand the terms and are comfortable with them. Too many sales end in failure because of a misunderstanding on one side or the other.

The Buyer and Seller Don’t Lose Their Patience

Both parties ought to realize that the closing process takes time.  There is a myriad of details that have to be worked through for the sale to close successfully, or to close at all.  If the parties are using external advisors, it is vital that they are deal-oriented. In any case, unless the deal is illegal or unethical, the parties should insist that the deal work.  The buyer and seller should understand that the outside advisors provide them with the information and skill on rules and law, but the last words belong to the buyer and the seller themselves.   The buyer and seller should also insist that the outside advisors keep to the scheduled closing date, unless they, not the outside advisors, delay the timing.  Prior to engaging the outside advisors, the buyer and seller should make sure that their advisors can work within the schedule.  However, the buyer and seller have to also understand that nothing can be done overnight and the closing process does take some time.

No One Likes Surprises

The seller should be upfront and honest about value.  Nothing is perfect and buyers understand this.  Shortcomings should be revealed at the outset because sooner or later they will surface.  For instance, the seller should consult with an accountant about any tax implications prior to going to market. It is common sense that the same applies to the buyer. If financing is a problem, it should be discussed at the earliest opportunity, and if all of the questions and concerns have been dealt with at the outset, the closing will be a formality.

Both Parties Must Feel Like They Got a Good Deal 

The closing is a mere formality if the sale is a win-win agreement that everyone understands and accepts.

Copyright: NEBP & Business Brokerage Press, Inc.

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