One of the most important functions of a mergers and acquisitions intermediary is providing education, and setting the right expectations for a business owner. It can get a little tricky when it goes wrong.
We are selling a company right now that is a fairly good size, very profitable (well over $1 million in earnings). When we were first discussing our commission, I was trying to explain to the business owner that we do far more than find a buyer, and that at the end of the deal he’ll look back and realize how much work we did.
Well, fast forward to today. We found a buyer and have a signed letter-of-intent and have gone into due diligence. Due diligence, or “book-check” is when the buyer’s team (a team of four people in this case) come into the company and dive into all the books and records.
The first thing that happens is the buyer sends across the due-diligence checklist, and in this case the checklist frightened the sellers. They have operated the businesses very simply, and many of the items on the checklist just don’t exist. We stepped in and Fred Hall from my team actually took the seller’s raw accounting data, studied the data and proceeded to create many of the reports for the due diligence team. Thank goodness Fred is a whiz at this stuff and enjoys doing it. He spent Sunday and Monday preparing, and is spending Tuesday, Wednesday and Thursday (a multi-hour drive) with the team on behalf of the seller. The seller isn’t there, but is stopping by occasionally. Typically the seller uses their CPA, CFO and/or bookkeeper to handle the due diligence, not the intermediary.
We feel we have gone the extra mile for the seller in doing this, so I was surprised when the seller emailed, wondering why he was going to have to use his attorneys to review the legal contracts. Angry actually.
In hindsight, I can see I had unexpectedly set ourselves up for this. The seller doesn’t see that we have stepped up and gone beyond what most firms would do. I told him we would be doing a lot of work, and he now expects a LOT of work.
We are talking, and I’m sure we’ll come to some understanding. I learn a little on each deal, and on this one I’ve learned to more carefully set expectations at the outset.