Untrusting Owner

by a searcher from University of Florida

1 week ago

Hoping for some advice from the community.

I'm talking to an owner of a business that I believe has potential. 

He is a salesman type and gives off an untrusting vibe. 61 years old, said he wants to retire. I think he still has energy and I'm concerned he'll start another similar business after a transaction. He sold one business in 2013 and started this company immediately after (what's to stop him from doing it again). Trying to find ways to derisk the transaction. 

Here is what I've come up with:

1. Have him pay for the QoE 
2. Get R&W insurance
3. At least a year of employee agreement
4. Decent amount of seller note that is forgivable

Anything that I'm missing?

2 likes
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10 comments

searcher from Pennsylvania State University

There is more information needed to answer this properly. M&A strategy is different for every deal. The standard restrictive covenants will serve to protect you or at the very least flush out the bad actors. Duration and scope of the restrictive covenants should be determined after considering several factors such as size of deal, length of time in business, industry, whether is it a product or service, tenure of staff, and customer relationships. Truth is you should never rely on trustworthiness as that is a feeling. Rely on data, leverage, and contracts. You can also use an escrow tied to warrants and representations as well as restrictive covenant terms. Happy to help if you need it.

5 days ago | like reply | 0 likes

professional

Either bin the deal or make him sign a non compete for a minimum of 5 years, get a good amount of seller financing that payment is dependant on business revenue and try to get to know the guy a bit more. I have spoken with quite a few sellers over the years and a lot of them seem a bit off but its usually a bit of a defensive act as they love their business and want what's best for it... Maybe he doesn't trust you with his 'business baby' so try to put his mind at ease a bit if you can and then see if he will open up to you a bit more.

If you feel like you just cant trust him at all just move on to the next deal - there are plenty of fish in the sea and plenty of businesses on the market lol

6 days ago | like reply | 0 likes

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