Why do some deals take longer to close than others do?
When a handshake takes place, it generally means the seller and buyer have reached an agreement on a multiple, along with a general idea about the recurring monthly revenue, as well as a few other issues that might be important to the buyer.
So, why isn’t the deal closing by the end of the following month?
A Number of Good Explanations
There are a number of good possible explanations. However, the most common is that the seller’s records are less than what the buyer needs to confirm what, exactly, they are purchasing in the deal.
Sellers can and should prepare for this eventuality — not just because it’s going to expedite a sales transaction but also because it’s best business practices. All the things that a buyer is interested in reviewing are things that a seller should already have prepared; they’re things that the seller uses in everyday operation of the business.
I don’t know if clients who call about selling are evasive, untrusting or don’t want to be any less than precise. However, I know that too many can’t answer simple questions that I think every business owner should be able to answer all the time — not just when forced to figure it out.
The following are a few items on which I think you ought to have a constant handle:
- the number of accounts and the mix between residential and commercial
- the types of systems
- the types of equipment
- if there are secured liens
- if taxes are up to date
- if there are agreements restricting the right to sell or any other impediments to selling or operating
- the current accounts receivable ledger
- the current accounts payable ledger
- any government loans that have to be repaid
- whether all owners are onboard to sell
- whether bank records will confirm receipt of accounts receivable
- whether the seller has a current license
- whether the seller uses contracts
- who wrote any such contracts
- how many technicians and salespeople are employed
You should have most, if not all, of the above information at your fingertips. If you don’t, you should be able to generate it in one day. If you can do that, you will be prepared to sell.
The Buyer Can Slow the Deal
The buyer can be the reason that deals lag. Sometimes, buyers simply aren’t that interested in the deal. However, more often, they are unsure, mistrustful (of the seller and everyone else) or simply do not have the financial wherewithal for the deal.
Meanwhile, some lenders have no idea what to look for and why, and they complicate a deal to death.
It’s best to call in Jim Wooster when you need financing for an alarm deal; he knows the ropes and, if he lends, you know that he thinks it’s a good deal.
Security Sales & Integration’s “Legal Briefing” columnist Ken Kirschenbaum has been a recognized counsel to the alarm industry for 35 years and is principal of Kirschenbaum & Kirschenbaum, P.C. His team of attorneys, which includes daughter Jennifer, specialize in transactional, defense litigation, regulatory compliance and collection matters.
