Selling your business is a significant undertaking. You’ve invested your life, time, and energy into building a business, and now you’re shifting gears into something entirely different: convincing others why your company is a smart investment opportunity.
But here’s the reality that many sellers aren’t prepared for.
Not every promising buyer makes it to the Letter of Intent (LOI) stage.
In fact, it’s not uncommon for interested parties to back out before the LOI is due.
In this blog post we are walking through a recent deal that happened at Osage Advisors and the challenges that came with it. Despite strong buyer interest and impressive growth metrics, several bidders pulled out before the LOI stage… and for reasons that might surprise you.
High Interest Doesn’t Guarantee a Smooth Ride
Osage launched a competitive auction process that generated intense buyer interest. This company saw:
- Double the number of bids compared to a typical deal
- Enthusiastic buyers eager to move forward
- Strong financial performance with sustained revenue and EBITDA growth
Everything seemed aligned. But despite that momentum, buyers began to drop out.
Why Qualified Buyers Walk Away
There are countless reasons why buyers might step away from a deal. In this case, some of the most surprising ones included:
- “You’re growing too fast.”
It sounds counterintuitive, but some buyers couldn’t secure the financing they needed because the growth was so strong that lenders questioned its sustainability. The banks didn’t feel confident funding the deal, and the buyers weren’t comfortable increasing their equity contributions to make up the difference. - Concerns about ownership transition.
One buyer questioned whether the owner would stay on long enough to support a smooth handoff. Despite having industry experience, they lacked a leadership bench to step in right away, which made the transition feel risky. - Supply chain and vendor dependency.
Some buyers worried about key vendors and whether the existing relationships could be maintained after the sale, even though the company had decades-long supplier relationships and was a top customer.
These buyers had strong interest, impressive offers, and every reason to move forward. But they decided not to pursue next steps because of financing gaps, risk concerns, and misaligned expectations.
Navigating the Unpredictable Buyer Landscape
Sellers often take it personally when a buyer backs out. But the buyer community is fickle, and sometimes there are 99 reasons not to buy — and only one to say yes.
As Keith Dee, President of Osage says, “Put your best foot forward.” Even if the financing picture changes, or equity contributions shift, there could still be a deal to be worked out. Sellers need to stay flexible and understand that buyers often drop out before the LOI due date is part of the process.
That’s where a skilled advisor becomes invaluable. At Osage, our team is there to guide you through these twists and turns, bringing multiple qualified buyers to the table and helping navigate the hurdles that can derail a deal.
If you’re thinking about selling your business, remember: the road to a successful deal is rarely a straight line. But with the right process and team, it’s a road worth taking.
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.
