The M&A Slippery Slope - By Acquisitons Specialist, Ran Carmon

You want to buy a company. You really, really do.

The Research Phase

Having researched the market heavily, approached several acquisition targets, signed endless NDA forms and viewed endless sets of accounts you finally managed to find a business and you are ready for your first meeting.

Armed with the financial information marked in 5 different colors and a whole set of questions, you make your way to meet the vendor of what possibly could be your future second home.

You are excited but you rein yourself in not to get too carried away.

You already know what you are going to do the day after you take over this business and you have not even seen it yet.


The first meeting

You arrive at the meeting waiting for the seller and (with a bit of luck or misfortune) their business broker.

It feels a bit like a blind date knowing she may bring her mother along…

You turn to random people asking them if they are the person you are looking for (unlike dating there is usually no picture of the seller on the website) finally you see a man who looks less than half your age and, as you expected, coming along with his agent.

Of course, the seller will not be wearing a tie… He wants to come across like a multi-millionaire who just happened to pass by and his agent is overly dressed to show his client that he is serious stuff…

And then there is you.

You sit together, talk about some completely unrelated stuff until, as if by mistake, the agent brings up the issue you are there to discuss – the business deal.

This usually is the shortest part of the meeting where you both discuss what the future could be like for both of you and how you both see the drama unfolding.


What’s it worth?

They are completely convinced that their business is worth a hell of a lot of money because they want to see the world and buy a new car and you are somewhat unconvinced. You seem to have an unrealistic view of business valuations because you base it on a silly thing you called profit…

Then comes the story. The story about how successful this business used to be in the 1980’s and how the market is coming back and that they just went through an incredible investment in the business which is literally just about to start to show fruit, but that has just got to sell the business NOW because of so many reasons.

You sit there trying to hold yourself back from bursting out laughing at them and you think it’s best to move away from valuation discussion for now…

You think to yourself that the best thing to do is to move on to your questions because surely you can show them step by step how you have reached your very reasonable business valuation. The further you go into your questions the more the seller likes you. You show him that you know your stuff about his business. He is very impressed.

You discuss all the seller’s concerns and how you will securely help him manage the risks he is facing, how much you understand him and how well you could work together. You suddenly realize it’s been 2 hours. The meeting has to come to a close. You agree to think about the meeting and revert back with further questions.


Following up on your meeting

The next morning you are up early sitting at your laptop composing a loving and supporting email to go to the seller (and his agent).

Two days will go by before you will get a response (treat them mean and keep them keen)…
You then get a response to all your questions and the additional financial information you requested and you arrange the second meeting.


Discussing Heads of Terms

Once again you meet, but this time you are visiting the business. You finally get to feel, see and smell the business you are about to buy and you see that what you thought you could do with the business is only 10% of what actually can be done.

You get even more excited about buying a business and you look at the boss chair. You see yourself sitting in it managing this business far better than it is run today.

You think to yourself that this is actually an empire that has been neglected because it has been providing the seller with an acceptable salary and good quality of life. You go out for lunch and you discuss the acquisition, timings, payments, valuations, security, and as the wine flows so does the flexibility over the terms of the deal.

You finish that meeting knowing exactly what the Heads of Terms will look like and you agree that the agent will send it over to you within 7 days.


7 days later…

7 days go by and you open your email to discover that the draft Heads of Terms has finally arrived.


You take a deep breath, you print the document and you take a red marker pen. An hour later you discover that really it’s just best to start again.

You start again and somehow you manage to put it all into 20 bullet points that are clear and easy to follow. You send it back to the agent and the seller.

30 or so emails later you have got a draft Heads of Terms that you are both equally uncomfortable about and you are ready to move forward.

You sign the heads of terms and two days later you get a copy countersigned by the seller. You’ve done it!!! You have got a deal.

What could possibly go wrong???


The slippery slope…

Heads of Terms only outlines the principles of a deal and it is usually not legally binding in the UK (unless otherwise is stated on the document but even then it is debatable) Heads of Terms is actually where the Slippery Slope starts. You get on well with the seller and their agent. You have all the terms agreed but really you are not even halfway there. Once Heads of Terms are signed you should take a deep, deep breath and look at other businesses immediately. Most people don’t know this but the moment you signed that document you have set off an atomic bomb connected to a clock and neither you nor the seller know when it will go off.

Time is ticking and that is all you know. Although you get on well with the seller and you have sort of agreed on a deal, every change, every delay, every emergency, every order, lack of orders, turnover, profit change, holidays, the news, diplomatic issues, love, hate, illness, fortune (good or bad) and anything under the sun will have an impact on the terms of the deal and on whether the deal will even happen.

You must be consistent in your approach and move at a good speed or the deal may run out of momentum and the bomb will go off, throwing you and the sellers back to the very beginning at best – and at worst to completely different sides of the world.


Hope for the best but expect the worst

If you look at several businesses at the same time, you are less likely to be affected by losing one of them. You will also always have a plan B. That’s the most powerful piece of advice I can give you, drawn from 10 years of experience! The next best thing you can do is try to be available and to stick as closely to your end of the agreement as possible, while regularly meeting with the seller (I would even go as far as to add monthly meetings into the Heads of Terms) Keep the seller close to you emotionally.

Get to know them and find out the real reason for the sale. Also, it’s time to gain some of that industry knowledge they have possessed for so long.

Chose your lawyer wisely.

Lawyers could be useful for bomb dismantling but all too often they cut the wrong wire (and we all know what happens then…) Make sure your lawyer is aligned with your views and don’t be easily scared by what could happen if…

Almost nothing that you are trying to protect yourself from will actually happen and almost certainly many issues that no one ever thought about will arise.


The importance of a good relationship

The conclusion is: you need to develop a good working relationship with the seller which sometimes comes in contrast of protecting yourself against a risk of something that is highly unlikely to happen. Of course, on the contrary, I’m not in support of buying a company on a handshake. Far from it!

Keep a sincere, friendly and above all, understanding dialogue with the seller. Make sure that when issues arise (and they will), that you are able to sit around a table and fix them. The longer issues are neglected for, the larger they become, so make sure you tell the real issues from the negotiation ‘trying it on’ sort of ‘problems’.

Make the completion date as soon as you can. Even if unrealistic, you can always extend it later, but get everyone working towards a pressing timeline. This will ensure momentum is not affected and that the time that goes by actually works in your favor. Every day that goes by, the seller gets closer to his dream retirement (which by the way will never ever look like they planned and imagine – but that’s a story for another time)

Hope you enjoyed reading my insight and that I didn’t put you off buying a business…


If there is anything I can help you with please do make contact with me on


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