“You cannot be serious!” Colleagues at Business Partnership will often mutter these words when a business sale breaks down unexpectedly, especially when the reason seems somewhat bizarre. Selling businesses is a complex and often lengthy process and is not always easy – it’s comforting to know there are experts, like Business Partnership, who are here to support you through the ups and downs providing the guidance and support to keep your deal on track. A professional broker often plays the role of sage and agony aunt, often on the same call!
Separating you and your fellow business owners from a business that has taken such a lot of blood, sweat and tears to build is often more of an emotional process that sellers consider. At Business Partnership, rest assured in 40 years of business, we have seen sales fall through for a number of reasons – from the good to the bad, the ugly and the downright strange. Here are just a few lessons we’ve learned as to why business sales stall.
Failure to Launch
Of the more common reasons why business sales fall through we see unexpected health issues, acrimonious divorce or separation, bereavement, and disagreements between partners or shareholders. So setting up the business in the right way (shareholder agreements, keyman cover) is vital, so that all know what happens in such circumstances. Disputes over ownership of company cars can also become quite heated, so before putting the business on the market, agree on what is included in the sale and what is not.
Looking at the more quirky reasons sales fail, below are some examples of the stranger reasons our Regional Partners have encountered.
Terms of Endearment
An offer was accepted by the vendor of a three-storey restaurant with the condition that the buyer cleared out all the old furniture. This was all recorded in the Heads of Terms. The purchaser changed his mind some weeks later and asked the vendor to clear out the furniture and fittings instead. The vendor disagreed, trust broke down and so the vendor pulled out of a deal worth £440K to him. As he could have hired a clearance company for a few hundred pounds to do the job, he effectively threw away £339k!
Lesson –Whilst any change in offer erodes trust, always look for solutions and keep the bigger picture in mind.
Space Jam
The sale terms of a bookshop included three parking spaces, but only two were legally theirs. The seller procured a third parking space, at a special low annual rate, but this wasn’t enough for the buyer who withdrew their 70K offer at the last minute.
Lesson – Check you have the rights to what you are selling, do not assume custom and practice will suffice
Permission Impossible
On the day before completion of a £1m brewery sale, we received a call from the bank. It had come to light that the building did not have planning consent to be a brewery despite having traded from its location for
23 years! Whilst the chief solicitor for the local council tried to intervene, he failed to satisfy the bank that all would be resolved, and funding was withdrawn and the deal collapsed.
On another occasion, we were instructed by a man to sell his business. However, our checks showed that he didn’t own the business, but was trying to sell it whilst the real owner) was away on holiday!
Lesson – Prepare for sale and do due diligence on your own business before you agree an offer
That Awkward Moment
The buyer of a £1 shop had a reality check, but only after the exchange of contracts! He realised that to achieve sales of £17,000 per week he would have to move at least 17,000 items of stock – something he wasn’t willing to do at his stage of life. His eureka moment cost him £50,000 in compensation to withdraw from the sale. Awkward!
Lesson – Ensure the buyer knows what he is buying and take nothing, however obvious, for granted.
Gone with the Wind
Our client’s business premises burned down a day before completion. A tragic and clearly unforeseen event, but the finance director, so close to completion, had neglected to renew the insurance cover which had expired days beforehand. Everything was lost.
Lesson – Run the business as if you were not selling it until the cheque hits the bank
Sadly, some purchases are just not meant to be. Our advice is to enter into business sales with your eyes open and having disclosed what you would want to know if you were buying and not selling.
Paul Dodgshon is a Regional Partner with Business Partnership, a business brokerage with 40 years’ experience of selling business and offices all over the UK.
