How to Close

June 23, 2019

by a searcher from University of Pennsylvania - The Wharton School in San Francisco, CA, United States

I am looking for some case studies/strategies from people who have closed or tried to close a proprietary deal where they are dealing with an aging founder of a high growth company. In this particular instance, I have been talking to the owner of a business for 3-4 months, and I assumed he was interested because he flew directly to meet me within 2 weeks of my initial phone call. Fast forward, and I gave him a very strong offer with an earnout component to bridge the gap from reality to his expectations. Now he is playing hard to get (or is legitimately offended, I dont know), and I am trying to understand the best way to break through. I offered to fly down next week and speak with him directly, but he pushed back on that. Do I fly down anyways to build the relationship? Do I come back in a month or two? Build the relationship in some other way? Would love to hear from people who have crossed the chasm and tried multiple strategies to break through the last wall to closing. I really love this business so want to make something happen - and I have the advantage of dealing directly with an owner with no one else around the table.

Reply by a searcher
from Sri Chandrasekharendra Saraswathi Viswa Mahavidyalaya in Hyderabad, Telangana, India

I did one such deal where I was working with an aged owner and I must admit it was the most complicated deal. The owner had run his business for 30 years and had a lot of emotional attachment to the business. On one side he would want a good valuation and If I worked the way around to arrive at his proposition he would still not be comfortable. He trusted me well and I virtually was the only person who knew the inside out of his business nuances. It took me around 14 months to get the owner arrive at the final terms. I was also deeply worried if the macroeconomic situation would deeply deteriorate. Fortunately the market remained the same and the deal was successful. It was a difficult deal. The new buyer also found it difficult to run the same as respect and affection for the owner and found it difficult to accept the new buyer in his place very quickly. In all it took almost 24 months to get the rhythm back. My suggestion is to meet the owner more often than planned. Speak to him during his free time and get comfortable. Understand his personal side and his needs. He may also share aspects that normally he will not be willing to share over his normal business discussions. Its time taking but guess its worth it if you are focussed in buying his business, The more he reveals also is good to know as it could help you factor any new risks. It works well to spend lot of time with aged owners.

Reply by a searcher
from Rensselaer Polytechnic Institute in Queens, NY, USA

I have also found that aging owners can sometimes be challenging. They have nothing to lose by being open to offers. You do all the work and they get a free analysis of their business. In the low probability chance your offer meets their expectations, they can cash out at an attractive valuation. More likely than not, they are going to be entertained (and/or offended) by your offer and not even consider selling. I have been in a similar scenario and let an owner consume too much of my time for 5 months (similar situation to you, got to post-offer discussion). I recently decided that I was going to walk away from this deal. It was very liberating. If the owner comes back to me (unlikely), I would still consider it. My only advice is to judge the character of the owner. Is this someone that you think is genuine and could see yourself working with? This is especially true since an earn-out is a longer term relationship. If so, set a reminder in your calendar to follow up from time to time. Staying in touch doesn't require a huge investment of time. If not, it is time to move on.

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