Hello SF Community, I recently looked at a deal in Houston, TX with a asking price of $5M (Asset heavy construction service industry with 3.5-4M FMV equipments). Signed NDA & got the CIM, but it didn't had the seller details, company name. Reached out to the broker and got a response "We’re not quite giving away that information just yet". I am encountering this the first time. Is this very common.
Then I tried to setup a call with the broker, 3 voice messages, 2 email, and 4 days wait, got an email response, "Unfortunately, the available funds you indicated on the NDA is insufficient to complete this transaction."
"we do not give exclusivity unless funds are first proved. There has been a lot of interest in this business, particularly with those who are bringing their own money to the table. Let’s part ways."
Broker hasn't spoken to me at all in the whole situation. Without having an LOI, how a self funded searcher can prove the funding beyond the 2-5% cash in hand. (I did provided the letter of support from LOB). Any other self funded searchers faced similar experience. How do I better equip to avoid similar situation going forward. All advices are much appreciated.
Self funded searcher - Broker interaction
by a searcher from Rice University - Jesse H. Jones Graduate School of Business
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We can Zoom to talk about it.
Few other points:
Brokers have responsibility to their clients (the seller). This is no different than any other business who should take care of their customers.
In the beginning, after you sign the NDA, and get the CIM, if it does not disclose, do not ask for business name, specific location, customer names, etc. In my book, those are disqualifying questions if asked prematurely. Instead, focus on the business. Ask open ended questions. Do not ask customer name but something like ...can you tell me about your customers? What industry they are in? Are they local? New or repeat customers? Concentration? etc. I can think of a dozen other "customer" questions, and dozen other "categories" to learn about the business. Also, set of questions to broker are different than that to the seller. Do not start with a written set of exhaustive set of questions. Listen to the unspoken words.
There is plenty of equity capital available in the market, especially for businesses with more than, say >$500 k SDE. Broker's job is to get the "best" buyer (price, structure, probability of close, fit with non-financial objectives, minimize owner time, low DD risk, etc.)
Not all brokers are alike. Frankly, there are enough untrained brokers. Untrained may an opportunity for a searcher or, more often than not, a pain. Similarly, there are many sellers who do not know, or do not like, or do not want to pay a broker. These sellers would love a searcher.
In my practice, in many deals (but not all), buyer gets the CIM a) after the NDA and b) after a phone call with me. And my CIM typically excludes Seller name. Very often seller wants "everything" without broker over-exposing. The most confidential information for a seller is that the business is for sale.