2024's Biggest Deal Breakers: What Really Killed SME Deals Last Year?
2024's Biggest Deal Breakers: What Really Killed SME Deals Last Year?
While we saw many business sales make it across the finish line in 2024, we also watched several promising ones fall apart. On review, one truth stands out: deals rarely died because of price alone.
While market conditions and financing issues play their part (these can definitely impact a deal), we saw quite a deals fail due to entirely preventable causes.
And when a deal falls through, it's not just about the numbers – it's about time, months of work, the emotional investment, and often significant costs on both sides going to waste.
Here are the three critical issues our team saw repeatedly impact deals in 2024, and more importantly, how to avoid them this year.
1. The Preparation Gap: Good Deals Can Die Before They Start
In 2024, we saw several promising deals collapse simply because parties weren't adequately prepared for the journey ahead.
On the buyer side, we’ve witnessed eager purchasers dive into negotiations only to discover their funding isn't as secure as they thought. Even more common is the lack of preparation around security for deferred payments – a crucial element that frequently becomes a sticking point late in negotiations when it should have been addressed upfront.
For sellers, slow or incomplete responses to buyer questions about operations, financials, or market share can quickly erode buyer confidence. We've seen solid deals collapse simply because sellers couldn't promptly provide basic information about their business
Quick Tips
Sellers: Before going to market, assemble a comprehensive data room with key business documentation, financial records, and operational details. Be prepared to substantiate your claims about the business with concrete evidence and appropriate warranties.
Buyers: Secure your financing early and be clear about your capacity for deferred payments. Develop a detailed due diligence checklist and share it early in the process. This demonstrates seriousness and helps identify potential issues before significant resources are invested.
2. Regulatory and Third-Party Consent Requirements
Sometimes, the success of a deal hinges on factors outside either party's direct control. Take the case of a business with a critical component of value residing in key agreements with a Postage Service provider. Despite both parties being eager to proceed, the deal stalled when they discovered the agreements required prior written consent for transfer – a detail that should have been addressed before reaching contracting stage.
These third-party consent requirements often lurk in the background of business operations, only emerging as critical issues during the sale process. When discovered late, they can derail even the most promising deals.
Quick Tips
Sellers: Conduct a thorough audit of your key contracts and relationships before going to market. Understanding transfer restrictions and any consent requirements early will help you address these issues proactively and prepare for any buyer concerns.
Buyers: Include a comprehensive contract review in your initial due diligence checklist. Early identification of potential roadblocks allows for practical solutions before significant resources are invested.
3. The Human Factor: Managing Emotions and Expectations
Perhaps the most overlooked deal killer is the human element. In one notable case, an inexperienced buyer withdrew just before exchange, overwhelmed by the commitment to operating the business post-sale despite previous enthusiasm. The emotional weight of buying or selling a business can't be underestimated – it's a process that challenges even the most seasoned businesspeople.
For sellers who've built their businesses from the ground up, emotional attachment can cloud judgment and create unrealistic expectations. For buyers, especially first-time buyers, the pressure of making such a significant investment and often taking on far more risk than they previously have considered, can trigger last-minute doubts and anxiety.
Quick Tips
Sellers: Recognise that your emotional connection to the business might affect your objectivity. Focus on documenting processes and preparing clear handover plans to help build buyer confidence.
Buyers: Be honest about your experience level and concerns - surround yourself with the right people, who understand the industry and the process of business buying and selling to help you get the confidence you need to move forward. Seeking professional guidance isn't a sign of weakness – it's a mark of due diligence.
A note on Business Brokers. This is where professional business brokers prove their worth. Beyond their technical expertise, experienced brokers can help both parties navigate the emotional aspects of the deal while keeping discussions moving and focused on practical solutions.
The success of a business sale often depends less on the technical details and more on how well both parties navigate and negotiate these common deal killers. By understanding and preparing for these challenges, buyers and sellers can better protect their investment – both emotional and financial – in the sale process.
Tags: business owner small business tips
About the author
Joanna Oakey
Lawyer and Managing Partner, Aspect Legal
Joanna Oakey is a commercial lawyer and deal maker with a passion for business, who has worked with hundreds of businesses during her 2 decades in the ...
