Really - check out your buyer early

We were approached by a seller who had the basis of an offer already in hand from a privately-held buyer. The sellers Board wanted independent confirmation that the offer was a good one, so they engaged Corum to do a limited search. We told them up front that the offer they had was VERY good (almost too good) and that there would likely not be any other offers close to it but they insisted we look. Sure enough, the original offer was way above any other offer received. We cautioned the seller that our research showed that the buyer had no history of buying and that the level of financing needed to do the deal could not likely be managed by them internally. The seller was convinced by the buying CEO that he had the needed Board support and financing. We encouraged face-to-face Board level contact, but the buying CEO refused  yet the seller was undeterred. Both sides engaged lawyers and accountants, and after months of distraction and thousands of dollars of legal and accounting fees  the buyer just went quiet and the deal fell apart.

 

Like your mother told you, If it looks too good to be true it probably is. Make sure you do your due diligence on the buyer.

Posted by , Vice President on 9 September 2011
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