Experience dealing with business owner directly listing their business?

searcher profile

October 29, 2024

by a searcher from University of Southern California in Los Angeles, CA, USA

Hi,
I found a listing I liked, signed the NDA, and received the CIM. It turns out that the business was listed directly by the business seller. We had a good conversation, and I like the business. I think there are pros and cons to this situation, so I am reaching out to see if buyers have had similar experiences and how they navigated through the transaction. I would appreciate it if you could share what helped and hindered the sale's progress. Thanks

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commentor profile
Reply by a professional
from Bentley College in Miami, FL, USA
I don't have personal hands-on experience with this situation but I have had clients that were going through this. Working directly with the seller has its own unique dynamics, and buyer-seller alignment from the start can really help move things forward. You want to really understand why the owner is selling and what level of attachment (emotional, family) they have to the business. Another common issue I've seen is around valuation. Having a broker put a valuation on a business offers at least a minimal level of sanity compared to when the seller just pulls a number out of a hat.

If you ever need help building your deal team, take a look at DueDilio. We can connect you with an attorney, M&A advisor, or due diligence professional who can assist in navigating this type of transaction. https://www.duedilio.com
commentor profile
Reply by a searcher
from IESE Business School in Waterloo, ON, Canada
I've had this experience a couple times. In my opinion it's quite suitable for a search fund because the relationship with the seller will play a larger role in the decision to sell the company when there is no intermediary. My experience has been that the direct sellers were very transparent and willing to share data, but the data sometimes wasn't formatted well and I had to create detailed lists of what I wanted access to, because there was no data room. It can be possible to negotiate unconventional deals (e.g. with very high vendor takeback), but the workload to design and explain these alternative deal structures is on you because they likely won't be familiar with the topic.
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