Seller came back after walking away six months ago - what would you do?

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April 08, 2024

by a searcher from Northwestern University - Kellogg School of Management in Milwaukee, WI, USA

Imagine you submitted an LOI - multiple LOIs, actually - and the seller ghosted you. Six months later, the seller has moved to a new, larger facility and asks if you're still interested in a sale.

The seller's reasoning for walking away the first time? "I'm going to run it for a couple more years then get [60% higher purchase price] for it".

I think I know the answer here - but would love to hear anyone's experiences making it work (or not) in cases like this.

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Reply by a searcher
from Bowling Green State University in Surrey, BC, Canada
If the fellow has *not* engaged a sell-side Advisor, I would encourage him/her to do so. You may even want to make it a condition to re-engage, but not in a bad or punishing way. It's more about ensuring the seller has the resources with which to meaningfully engage and execute. If there's no advisor, I could see a future where you repeat the process you've just gone through. If there's already an advisor in place, maybe have a discussion, 'real talk' as they used to say, about your previous experience and being left cold.
Is there some risk in bringing in a seller-advisor? - sure, that person may want to shop the deal; but generally, if the seller has a preferred route the advisor will respect that. Since you're the one looking out for the seller by encouraging him in this way, that preferred buyer should be you. If the seller just goes 'full process' and you're back into a bake off, meh, doesn't speak super-highly of the seller - so if transition help is key, that could be a yellow flag - but would likely still make sense to continue if it's a great business.
Last thing I'll say, moving into a shiny new facility needs be investigated:
- what was the prior set-up and relative capacity
- what was the capex and how is that going to change your potential financing equation?
- what costs are still to come and how have overhead costs changed? -- think about what revenue needs to do in order to catch up
- what's the impact on headcount? -- again, to costs, but also to complexity
- is management still sufficient?
- and who owns the building? -- if it's the exiting owner, imho another yellow flag
- and to the why - why make a move like this to sell within a couple years?

Now, it's possible the seller bit off more than he/she can chew with the move. In that case, they may simply be looking for help - help that could put you in a position for a slightly different spin on the transaction maybe by way of an Earn-in and/or vendor financed deal.

Good luck
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Reply by a searcher
from University of Pennsylvania in Miami, FL, USA
Partially agree with Wes. if interested, let him know and ask him to respond to your last LOI - you can resend it - so that you have an idea of what he wants. However, never assume you have leverage - be humble and gracious.

Ghosting happens - dont be offended. these folks are usually selling their babies and M&A is very often a foreign object to them.

Finally, proceed with caution. is he really going to sell this time.
perhaps you make him pay for the QofE to begin to show his commitment to the process. lots of variables here - age, family, illness, etc
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