What I Look For Before I Agree to Represent a Buyer

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The funding gate everyone talks about is the easy one. The three filters that actually decide whether a search ends at a closing are the ones no spreadsheet catches.

Most buyer-side advice starts from the assumption that the buyer is qualified and the only question is finding the right business. In my experience the harder and more important question comes earlier, and the filter that actually protects a deal is not the one everybody talks about.

There is one gate that is pure arithmetic, and I run it first because it is the fastest way to find out whether a conversation is real. The buyer has to be able to fund the deal they say they want. Not “we are working on pulling the equity together,” but a fundable match between the injection they can actually document and the injection the transaction is going to require. Under the SBA rules that take effect this October, the required equity on an initial acquisition is figured on total project cost, which includes working capital and closing costs and not just the purchase price, so the real number is meaningfully higher than most first-time buyers assume when they start. A buyer who is short on the injection is not a buyer yet, and no amount of enthusiasm closes that gap. This one is easy to check and easy to explain, which is exactly why it matters least. It screens out the people who were never going to transact, and it tells me almost nothing about whether the people who clear it will actually get to a closing.

The three filters that decide that are not arithmetic at all, and none of them shows up on a personal financial statement.

The first is whether the buyer can tell me why this business, and not merely why a business. A buyer with a real thesis has a reason they are looking at a particular kind of company, in a particular range, that connects to something they can actually do or fund or run. A buyer without one chases everything that comes across the screen, gets excited about deals that share no logic with each other, and cannot articulate to a seller why they are the right person to take the thing over. When it comes time to write an LOI, a buyer who was never really sure why they wanted this company stalls, because the conviction that carries a person through diligence and financing and the hundred small reasons to walk away was never there to begin with. I would rather find that out in a first conversation than three months into a search we both invested in.

The second is the reason underneath the purchase, because some reasons do not survive contact with diligence or with the transition that follows. There is the buyer who is really buying themselves a job they are not equipped to do, and the enthusiasm reads as commitment right up until the operational reality of running the company arrives. There is the buyer trying to acquire their way out of a personal situation that acquiring a business will not fix and will usually make worse. And there is the buyer who has fallen for an industry, who is certain about the kind of company they want because they have admired it from the outside, and has never really pictured themselves doing the actual work of running it once the prior owner is gone. These are not always easy to spot, because early on the good version and the bad version of the same buyer can look almost identical. Wanting it badly is not the same as having looked hard at it, and the buyers who get into trouble are usually the ones who fell for the idea of owning the business without sitting with what owning it will ask of them every day.

The third is whether the buyer can be coached through the reality of how a seller thinks, and this is the one I will end a conversation over even when the money is there and the thesis is sound. Some buyers come in treating the seller as an adversary to be beaten. They want to win the negotiation, and they see the seller as the obstacle. That posture will blow up a deal in diligence no matter how good the numbers are, and it will do it late, after everyone has spent money.

When a buyer comes in that way, here is what I tell them. The acquisition of a business is a deeply emotional process for the person selling. They are handing over what may be their life’s work, and all of the relationships that came with building it, and before they do that they want to know they are handing it to someone they like and trust. That is not sentiment you can skip past. It is a condition of the sale. And it does not end at the closing table. The sale itself typically runs ninety to a hundred twenty days after the LOI is signed, and there is almost always a transition period after the new owner steps in, where the buyer needs the departing owner to hand over the relationships and the institutional knowledge that make the business work. Sometimes the seller keeps an equity interest and the two of you are effectively partners for a while. Sometimes the working relationship runs years past the close. The groundwork a buyer lays in those first conversations, whether the seller comes to trust them or brace against them, follows the deal all the way through and shows up later in how smoothly the business they now own actually runs.

A buyer who can hear that and adjust is someone I can work with. A buyer who nods and then goes right back to treating the seller as an opponent is telling me how the whole engagement is going to go, and I have learned to believe them.

None of this is a character test for its own sake. It is the difference between a search that ends at a closing and one that burns a year and ends nowhere. The funding gate tells me whether a buyer can start. The three that follow tell me whether they can finish. Anyone can learn to check the first one. The rest is judgment, and it is most of the job.

A note for the CPAs who refer clients to me

If you have a client talking about buying a business, the moment they start is the moment your role gets bigger, not smaller. The entity choice, the purchase price allocation, the asset-versus-stock decision, the way the seller note and any earnout get structured, all of it drives their after-tax result and all of it is your work, not a buy-side advisor’s. When you bring me in, I run the search and the deal process and keep you in the structuring seat where you belong, because you know this client and their whole tax picture better than any advisor who meets them at the acquisition. The buyers who cause problems in the paragraphs above are also the ones who create exposure for the professionals around them. Part of what I am doing when I screen at the front end is protecting the relationships that sent the buyer to me in the first place.

A note for the wealth advisors

An acquisition looks at first like the opposite of the liquidity event you usually plan around, money going out rather than coming in, but for the right client it is the beginning of a larger relationship rather than a drain on the one you have. A client who expands an existing business through an acquisition has put themselves into a company with a higher multiple and a larger overall net worth, and that growth eventually translates into more investable assets, not fewer. The acquisition also opens doors that a simple sale never does. The employees of the acquired business are a financial and retirement planning population you were not serving yesterday. And a newly larger, growing business owner needs asset protection they very likely have not put in place, which is a role you are positioned to play precisely when it matters most. This is clearest for the strategic buyer who already owns a company and is adding to it. For the first-timer who is converting personal savings into a business at the closing table, the investable-asset growth is a longer-horizon outcome rather than an immediate one, but the trajectory runs the same direction. When a client of yours starts down this road, bringing me in keeps you central to the financing conversation and the post-close cash-flow picture rather than watching it happen from the outside.