Business Advisor and Dealmaker Testimonies: Deficiencies in Privately Held Small Businesses Leading to Failed M&A Transactions

Like running a company, the business exit process is complex and filled with uncertain outcomes. Some individuals start a business without much thought of an eventual exit while others enter with a goal in mind, an exit strategy from the onset. Even with a planned strategy, circumstances affecting business owners such as life situations (like retirement, health, family, time commitments, relocation, or burnout), strategic opportunities (like harvest, divestiture, growth, or turnaround situations), and other owner interests (both business or non-business related) outside of the company frequently arise while macroeconomic issues may interject potentially altering exit outcomes. Unfortunately, only a small percentage of businesses listed for sale eventually sell. This article provides insight to business owners and advisors on what major deficiencies exist which lead to unsuccessful ownership transfers of privately-held companies. To gain this insight, a study was conducted with business advisors and dealmakers who engage with small business owners in helping them sell their companies. This qualitative analysis involved coding the responses of 50 seasoned certified business intermediaries and exit advisors with median advisory experience of 15 years working with small business owners in the transition of their companies. These consultants responded to open-ended questions related to past experiences. Five central themes of deficiencies leading to unconsummated transactions were uncovered through the analysis: Problems associated with the business financials, management issues, operational issues, customer issues, and the lack of business owners understanding the selling process.