Most of our clients have built amazing businesses. Some were the HS All-Star, a successful student-athlete in college, won a National Championship at a big-time school and others were just good businessmen who filled an unmet need. We are relationship builders looking for people who believe what we believe. One way we get to know our clients is to play golf together and sometimes enjoy a great meal with great conversation together. One thing we know for certain with people is they will show you who they are once given the time to do so.

We were fortunate to be invited by a very successful businessman several years ago. During the run up prep for a case, we had multiple opportunities for everyone to let their hair down and see who we all have been for nearly a year together. What transpired during buyer selection blew our minds and everyone we shared the story with; we still can’t believe what happened. There are several milestones throughout a case where the seller-advisor relationships are strengthened as we get closer to closing.

One of those milestones is selecting the buyer the seller wants to sell to – accepting the LOI. Every IB will tell you a deal is likely to fall apart three times during a transaction. That was the last thought any of us at JSP had on this particular case. The day after our client chose his buyer, we met and began preparing next steps and confirmatory due diligence. What occurred that day still has us baffled.

• A seller doesn’t tell a buyer what the multiple is going to be.

• A seller cannot justify what the turnover will be after the enterprise is sold.

• A seller cannot project what the next five years of earnings are going to be after they’re gone.

But that’s exactly what this guy did; circumventing the process, contacting the buyer unbeknownst to us and damn near killing the deal. Unless the seller is rolling over equity or is part of a TSA, or maybe an earnout, the seller is not directing any of the terms. It’s a mutual negotiation of respectful dialog.

Any seller, any successful businessperson knows better unless the ego exorcises his head. Yes, every seller has no earthly idea what the multiple is going to be or should be because the buyer is going to invest in the enterprise to grow top line and earnings. At this stage of the game, we’re rarely surprised, but this jackwagon did a number on us for sure! You can imagine what’s running through our minds. We’re not saying they’re stupid, but we are asking ourselves that question.

This buyer is a good resource for us and their team are stand-up guys who’ve seen it all as well. What was cringeworthy to us was addressed in a matter of fact tone with grace to be honest. Their rep responded tactfully, “I’m sorry, Mr. Seller but if your top line has a compounded annual growth rate of <3% and your cash flow looks like a ride at Six Flags then you need to sit down and be quiet. We’re willing to structure a deal because we’re interested in what your business does for our platform. But if you think you can dictate to us, outside of your advisor, we’re willing to put pencils down and fly back home.” No one wants to be played and there’s a difference between a healthy ego and a destructive one. We saw both that day!

It was a perfect example of ego gone wild and trying to self-aggrandize himself to the buyer and all he did was temporarily alienate the relationship. We see it too often; a seller gets all gooey and takes the top dollar LOI. There’s much more to a successful case than the price, your desired multiple and satisfying your ego. It’s your case and we can only recommend the best course of action. Ultimately, it’s your decision and one you will live with until you die. Heaven forbid a seller would listen to somebody that’s gone before them. We want to see you succeed, get the highest price and the best deal terms for you, your family and your employees. When you listen you learn; when you don’t it’s painful and costly.