The merger and acquisition (M&A) process can be rather costly and time-consuming, but is usually worth it when the deal results in tremendous value for both the buyer and seller. However, failing to close is a small, yet ever present, potential that raises numerous concerns for both parties. We can broadly segment these concerns into the three main areas of; 1) seller-specific, 2) buyer-specific, and 3) general (or mutual).
As you can see from the above graphic, buyers and sellers each have distinct risks when it comes to transacting, but overlap in several ways as well. Opportunity costs, in particular, are the loss of potential gains from other alternatives such as foregoing one potential buyer (or seller) in favor of another. Neither side wants to feel like they made the wrong choice on their transaction partner which is why each side should take steps to reduce the potential risks associated with opportunity costs while also accepting that it’s impossible to remove all risk from a transaction (otherwise everyone would transact every other day).
Ultimately, buyers and sellers want the same thing, so working together to make it happen is the proper course of action. We recommend that buyers and sellers take the following into consideration when it comes to negotiating a term sheet in order to avoid buyer’s (or seller’s) remorse.
Regardless of if you are looking to buy or sell a business, our team of professionals is prepared to work with you to ensure that the business is well positioned to maximize value. Please contact us at HQ@kaulkin.com for a confidential consultation.