The curious reasons why some business sales stall

Author Paul Dodgshon, Business Partnership

“You cannot be serious!” Our partners 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 – so it is comforting to know there are experts, like us, 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!

The many degrees of separation

Separating you and you 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.

Rest assured in 40 years of business we have seen sales fall through for a number of reasons (the good, bad, ugly and downright strange), so I though it useful to share some of our experiences to demonstrate some key lessons we have learnt.

Of the more common reasons why 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 what is included on 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.

  1. Reneging on terms

An offer was accepted by the vendor of a three-storey restaurant with a 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 (had trust broken down) 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.

  • Parking problems

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 to fail

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 their 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.

Lesson – Prepare for sale and do due diligence on your own business before you agree an offer

  • Eureka moment

The buyer of a £1 shop had a reality check, but only after 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.

Lesson – Ensure the buyer knows what he is buying and take nothing, however obvius, for granted.

  • The cheek of it

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 – You have to do your homework

  • Fire fighting

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 a purchase/sale 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.

The curious reasons why some business sales stall