In Articles & Case Studies

The proof is in the pudding. It’s not over ‘til it’s over. Don’t count your chickens before they’ve hatched. Pick your cliché. Just because someone makes an offer to buy your business doesn’t mean they have the resources to get it done.

As a seller, you need to look at more than dollar signs on an offer to purchase. Make sure your advisors are researching and asking questions to figure out which buyers are for real, and which ones are just talking a big game.

Sometimes buyers want to rope you in to exclusive negotiations. They throw out a high price, fully intending to negotiate down as they do due diligence and “discover” weaknesses or areas where your businesses aren’t a good fit.

Some buyers have a big ego and want to be the big dog at the table. But their balance sheets or lending relationships can’t really support the promises they’ve made.

Still other buyer reps make what they believe to be a legitimate offer with all good ethic and intent. But if they’re not the final decision maker—the person controlling the checkbook—their efforts might be scuttled by a higher up, or a lender, who simply doesn’t see the same advantages in the deal.

9 warning signs your buyer can’t follow through:

  1. Too good to be true. They offer a super high price and a 45-day closing “guarantee no risk” if you’ll sign their exclusivity agreement. Your buyer may have ulterior motives. They’ll get access to your sensitive information and get you off the market (putting you in a weaker position).


Later, they’ll try to renegotiate the deal at a sizeable haircut or just walk away when you don’t accept their lowball offer. Either way, they gained meaningful competitive intelligence which could significantly hurt your business or its value going forward.

  1. Too vague. They won’t give you a ballpark on cash at close. I don’t feel good about a buyer who says, “We’re going to try to get as much as we can.” Or, “We’re not quite sure yet.” A good buyer should have some idea of their cash at close target.
  2. Unclear funding. They won’t disclose their lending sources. A buyer isn’t qualified if they can’t demonstrate financial ability to fund the deal.
  3. Lack of transparency. They won’t connect you to their prior business partners. If they’ve done acquisitions in the past, they should provide seller references. We want to know what the buyer is like to work with and if they do what they say they’re going to do.
  4. “Hidden” history. They won’t disclose anything about their acquisition history. A buyer who keeps their past business under wraps may not have as much experience as they say they do.
  5. No digital footprint. We’re looking for a website, press releases and announcements of past companies the buyer has acquired. Ideally, we’d like to see a few published news items, too. Active acquisition firms want to get their name out there.
  6. Fuzzy deal terms. Once you get to the letter of intent (LOI) stage, you need to strike a fine balance between strict detail and vague conditions.


While this is generally not the time to demand all the deal specifics, unclear deal terms could put you in a position of weakness later on. Alternately, a vague LOI could be a sign your buyer is kicking tires and not really committed to a deal.

  1. Slow to respond. Perhaps your buyer was engaged and enthusiastic at the start of the process, but now they’re taking a long time to get back to you. If there’s a noticeable change in communication, that’s a signal you’re no longer a priority acquisition target.
  2. No control over the purse strings. Buyers reps and corporate development teams aren’t the final decision makers. Business owners without enough capital to fund their own deals aren’t the final decision makers. These buyers have to “resell” the deal to their lenders or other equity partners, and that can introduce some measure of risk into the transaction.

As you evaluate offers, you have to consider whether one buyer is more likely than another to get a deal over the finish line. Some buyers are bad actors, out there to take advantage. But more often, it’s lack of resources – time, money, or authority – that can blow up your agreement.