Flexibility the key to a successful deal

By Brad Kirkpatrick

Brad KirkpatrickWhen selling your business, don’t expect to walk away with all cash at close. You may be asked to accept an earn out, roll over equity, or provide seller financing.

A seller who’s willing to bet on a buyer’s success will often be rewarded with a higher value. But a seller who demands all cash at close will subject to extra scrutiny. The buyer’s team is asking, “What does the seller know that we don’t?”

We had a buy-side client who agreed to a $6MM purchase, all cash at close. But during due diligence, we found the seller’s backlog had dried up and EBITDA was dropping. The buyer was willing to honor his original price, with a portion tied to future sales. The seller declined. He wanted all cash at close or no deal. He got the latter.

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Brad has been providing M&A advisory services and other consulting services since 2005 and has facilitated numerous ownership transactions. In 2013, he merged his M&A practice with Cornerstone Business Services.