Why seller concessions aren’t always the answer
As market conditions tighten and lenders become more conservative, a new hurdle has emerged in the M&A process: buyer financing delays. At Osage Advisors, we’ve seen a couple of deals reach the finish line only to stall because the buyer’s lender hasn’t yet signed off. The question is, when that happens, who should solve the problem?
The short answer: not the seller.
Lenders Are Slowing Things Down
In today’s environment, lenders are digging deeper. They’re applying stricter underwriting standards, more detailed covenants, and sometimes requiring multiple layers of approval. That can throw off the closing timeline and force buyers to scramble.
Instead of solving the issue internally, some buyers turn to the seller to “help” make the deal work…often by requesting a seller note, an earnout, or a last-minute change in terms.
But that’s not your responsibility as a seller. If a buyer’s lender has concerns, it’s the buyer’s job to fix them.
Sellers Shouldn’t Be the Backup Plan
In a healthy deal, the buyer should come to the table with their financing lined up. When they don’t, they may look for shortcuts. They may ask:
- Can the seller carry a note to ease lender concerns?
- Can we tweak the earnout language to satisfy the bank?
- Can the seller make a last-minute concession?
Your answer should be simple: we already negotiated a deal. If the lender has an issue, the buyer needs to find a solution that doesn’t shift the risk back onto the seller.
Real Deal Example
In one recent transaction, a buyer’s lender didn’t like the language around an earnout, even though it had already been agreed to in the LOI. They asked the seller to change the terms. We pushed back. We reminded the buyer of the original agreement and encouraged them to resolve it on their end, which they did.
This delayed the deal by a few weeks, but it preserved the structure and protected the seller’s interest.
Stay Proactive and Ask the Right Questions Early
To avoid surprises late in the game, we recommend staying on top of the buyer’s financing from day one. At Osage, we request:
- The bank’s proposal letter
- A commitment letter (when available)
- Regular updates on underwriting progress
These documents are not guarantees, but they help us track potential issues and ensure the buyer is moving forward with their lender.
Final Thoughts
In a market where deals are harder to close and money is more expensive, it’s critical to stay firm. Concessions should be strategic and thoughtful, not knee-jerk reactions to someone else’s financing problem.
Your deal should not fall apart because the buyer’s lender is dragging their feet. Protect the structure you agreed to. Monitor the financing process early and often. And above all, remember this:
It’s the buyer’s responsibility to solve their lender’s issues, not yours.
Certain Members of Osage Advisors are Registered Representatives of and conduct securities transactions through StillPoint Capital, LLC, Tampa, FL. Osage and StillPoint are not affiliated.
Osage Advisors provides a lot of guidance in the M&A market here on our blog and on our YouTube channel and Podcast.
