Avoid the 5 Ways Business Sellers Kill M&A Deals

By Ryan Kuhn. Since Ryan founded M&A advisor Kuhn Capital, the firm’s principals have initiated 80 tech industry mid-market M&A transactions together worth more than $3 billion.

Congrats. You finally snared a buyer who checks all the boxes. Time to cash in? Not so fast. Avoid the five ways business sellers kill M&A deals. They are:

• Didn’t commit the resources needed to prepare for and complete a sale
• Overvalued the business
• Mismanaged employees through the M&A transaction process
• Created an ineffective mergers and acquisitions project team (or no team at all)
• Allowed more than one person to have unsupervised contact with buyers

#5) Prepare Yourself

Pre-Marketing Prep

Call it pre-deal planning. I’ve published two articles on how to fix deal-killing problems and strengthen your company’s value before seeking a buyer.

One of them is a set of projects you can complete in less than six months: See Quick Ways to Increase Your Company’s Value.

The other covers projects that take longer but deliver greater value: See Renovate the Business for Long-Term Gains.

Both articles uncover seemingly insignificant but potentially deadly deal traps. Example: An acquirer much larger than our sell-side client finds during due diligence an apparently dormant legal threat against the seller. Could it be revived after the new owner acquires the seller’s equity? Did the seller try to hide it?

Embrace the Marathoner’s Mindset

The months-long M&A process demands commitment from both sellers and buyers, but much more from sellers:

• Buyers ask sellers many more questions than sellers ask buyers.
• Sellers typically have fewer resources with which to answer those questions.
• At the same time, those selling a company must continue operating it as before, or even better.
• The result? For many entrepreneurs, selling a company is the most demanding experience of their careers. Successful deals take time and effort. For ways to tell if you’re ready for that, see my  When Is the Right Time to Sell?

Why is this commitment to the M&A process so important? Losing momentum kills deals. When you nonchalantly drift through deadlines or give lethargic, incomplete responses, that gives off the vibe that you don’t care or, worse, may be hiding something. Don’t curb buyer enthusiasm.

Fortunately, experienced M&A advisors are there to lighten the seller’s load. For instance, before you go to market, your advisor should have completed thorough “internal due diligence” on your company to prepare a compelling Confidential Information Memorandum (CIM).

The perfect CIM anticipates and answers most buyer questions while creating a positive impression of the seller’s future.

That way, multiple buyers can quickly verify key claims about the company’s performance without distracting you, the seller, with redundant Q&A. (For how to write the perfect CIM, see my popular article about this key document.)

Inadequate preparation for the demanding due diligence and negotiation process is among the most common ways business sellers kill M&A deals

#4) Be Reasonable

Another of the five ways that business sellers deep-six M&A deals is by making aggressive, unsupported claims of company value. Yes, your company is special. And it’s got lots of promise, even if that’s not clear from past performance. Regardless, it’s still on you to justify what buyers may regard as an unrealistic expectation.

You need something more convincing than, “That’s what I want.” Or “I spent $XXX developing that app,” (though we actually hear that a lot). If you can’t back up your valuation with facts about profitable demand for your products or services, either lower it or wait till you’ve grown the business more.

Because setting reasonable expectations is so important, the first step we take with a prospective client is to establish a valuation range. The sell-side client needs to get comfortable with that range before we both spend months readying the company for a sale that’s unlikely to close.

Figuring What’s “Fair”

But how, you say, do you determine what your business is worth?

Mostly two ways: 1) Estimating the company’s future cash flow; and 2) Seeing what acquirers paid for companies like yours.

The third approach is an effort to fine-tune the other two—it considers the value a “strategic” buyer (an operating business in the same or related industry) believes your business adds to its own.

Unlike “financial” buyers, strategics can make or save money by folding your business into their already existing infrastructure. Some even benefit by shutting down a business they bought to eliminate competition.

Therefore, strategics might pay more for a target than its stand-alone present value and more than what other similar companies sold for. Finding a strategic buyer willing to pay a synergy premium is another service that effective M&A advisors provide.

For a deeper dive into how valuations work, see my How Investers Value Companies. For information on how to determine which buyer is most likely to meet your exit goals, including price, see my Find Your Best Buyer.      

Takeaway: know what your company is worth before entertaining buyers (but have them put their number on the table first!). Making arbitrarily high demands can convince suitors that meeting that demand isn’t worth the brain damage.

#3) Maintain Morale

The Perils of Loose Lips

Rumors about a sales process underway make everybody nervous – employees, suppliers, clients, lenders, etc. Most such scuttlebutt is wild and wrong. But countering it demands time you don’t have and can force you into compromising denials. Failing to control destructive gossip that leads to key employees and clients jumping ship is another way business sellers crater M&A deals

The best way to deal with water-cooler whispers is to stop them before they start, by going deep undercover until the deal is done. Not that you’re skulking around, hatching conspiracies. Rather, you’re tight-fisted about who knows what because you yourself don’t know for sure what the outcome will be.

Of course, after you’ve closed the deal, gather all employees together to break the good news. For instance, the buyer brings new, larger resources to the table that will benefit those who stay on. That means more career paths and greater responsibilities.

#2) Build an Effective M&A Team

What Do Team Members Do?

1. Mostly anticipate and help you produce due diligence responses.
2. Participate in choosing which buyers show the most promise.
3. Protect your interests in negotiating terms with the leading suitor.

Who’s on the Team?

Insiders and outsiders. Among the insiders (employees) are you, the owner and/or CEO; your CFO, and perhaps your CMO. You must be prepared to offer these people, and possibly other key employees, golden parachutes, golden handcuffs, etc., to retain their loyalty during uncertain and demanding times.

Outsiders on the team are an M&A transaction attorney, an M&A advisor who acts as team leader, and sometimes a CPA.

Team Member Qualifications

For CFOs/CPAs

The seller’s CFO/CPA must be able to slice and dice financial and operating data in multiple ways (e.g., sort customers by revenue, year, location, industry, margin). And do it quickly.

These days, companies that don’t track that kind of data attract few or no offers. Also critical are complete financial statements (income statement, balance sheet, cash flow) covering the past three years and forecasting the next three.

For M&A Attorneys

Your deal team attorney must specialize in closing M&A transactions. These pros are very different from lawyers who handle day-to-day corporate affairs or the owner’s personal business.

Caveat: Even with lawyers focusing on M&A, beware the well-meaning but inexperienced ones who don’t understand that deal negotiations are a game of give-and-take. The idea is to trade something of lesser value for something of greater value.

They may insist on small unilateral gains that kill deals with a thousand duck bites, or provoke a buyer to demand something of more value to you in return. As the cliché goes, the M&A lawyer’s operation may be a success, but their patient — that is, your deal — died.

Local, mid-sized law firms are often the best source of capable mid-market M&A attorneys:

• They’re less pricey than their larger brethren;
• They’re less likely to be distracted by larger, more lucrative clients. (We once had the seller’s M&A counsel from a large firm turn over three times);
• Mid-sized firms typically have enough specialists in areas such as intellectual property and employment law to quickly address such issues in-house. That saves time and money.

For Estate and Tax Advisors

Many owners or CEOs also need somebody to understand how the proposed deal affects their tax liabilities and those of other shareholders. Ideally, the same person also advises them on managing sale proceeds to optimize the structure of the sellers’ estates.

Getting advice from these specialists is relevant early in the M&A process, when you’re reviewing a buyer’s letter of intent (LOI). (See The Perfect LOI for how LOIs are used and what they should contain.)

OK, But What About the M&A Advisor?

Fun fact: professional M&A advisors (e.g., competent investment bankers, M&A practitioners, etc.) on average increase the sale price of their clients’ companies by about 25%.

Here are some ways they do that:

• Based on experience, they can suggest ways to position your company for optimal buyer appeal.
• Owners can’t personally test buyer interest without letting others know the company is for sale. An advisor can present your company anonymously until it is time to reveal its identity, only to qualified buyers under NDA.
• Sellers have two options when approaching the market:
  • Engage a series of buyers one after another over time. The problem with this approach is that it doesn’t tell them whether they’ve missed the best offer or if it’s yet to come. Plus, sellers get weary of deal fire drills.
  • Instead, use an M&A advisor to create an auction-like environment in which all buyers bid on a set schedule under competitive pressure.
• The owner/operator’s time is almost always better spent keeping the business on an even keel or even improving. Let the advisor take buyer calls and block them from pressuring you or other team members for special favors or inside information about the M&A process.
• It’s not a good look when a company owner grubs around for nickel-and-dime concessions from buyers or plays hardball with them. The two parties usually have to live happily together for some time after the deal closes. Sellers need to be the good cop, while advisors can afford to be the bad cop. Yes, negotiations between advisor and buyer may get a bit chippy, but that’s OK — the bad cop’s gone after close.
• Sellers need one person who knows the position of each interested party and how it changes over time. That person, the M&A advisor, allows them to work the room for the best offers.
• Other reasons:
  • Clear the market. Most sell-side campaigns require contacting hundreds of prospective buyers, both strategic and financial.
  • Level the playing field. Bring to the deal the same level of experience and sophistication as the buyer.
  • Stay the course. Alert the seller to buyer deviations from the deal SOP.
  • Preserve deal priorities. Help sellers define their deal objectives and identify any trade-offs required to achieve them.
  • Rank offers. Know how to boil buyers’ offers down to a single value so the seller can compare apples to apples.
• Last, a surprise to some, most buyers welcome competent sell-side advisors for their ability to move deals along in a transparent, business-like manner.

For more about the advisor’s role in sellside transactions, see my popular post How to Sell a Mid-Market Company (Advisor Version). And learn which type of intermediary you need by reading Which to Use – M&A Advisor or Business Broker?

#1) Who’s on First?

Of all the ways business sellers kill M&A deals, failing to limit buyer contact to a single seller representative is the sneakiest.

There’s a place for trusted employees and board members, but except for M&A team members, it’s not in the room with prospective buyers. You want only a single point of contact with the buyer for several reasons:

• Allowing multiple seller parties to interact with a buyer invites dissension within your ranks. That gives the buyer an opening to divide and conquer. It’s the “camel’s nose under the tent.”
• Multiple seller representatives create confusion about who’s actually in charge, slowing things down and risking divergent or disadvantageous commitments.
• Your single point of contact should be the same person who manages the entire M&A process. That’s your M&A advisor. Advisors don’t assume this central role because they’re control freaks.
  
  It’s because they need to herd multiple buyers forward like cats to create a competitive bidding environment (or at least the perception of one). They can’t do that without knowing everything about each buyer’s purchasing rationale, priorities and degree of interest. If they don’t, they (or somebody else on the seller’s side) might give away something to a buyer for little or nothing in return. Or they could divulge confidential details about the seller or the deal process. These and other untoward incidents occur when discussions between buyer and seller representatives take place across multiple fronts.

Quick war story: we had a sell-side client who secretly met with a buyer for dinner, despite having agreed in writing beforehand not to do so without advance authorization. Whatever was said that evening didn’t go down well. The next day, the buyer (the only one we had) called to say he was out.

Finally, It’s Not All Sellers’ Fault

Well, that’s it — now you should successfully avoid the five most common mistakes when selling a company.

But wait! Buyers blow up deals, too, even more than sellers. See why in my How Buyers Kill M&A Deals. (And unlike sellers, buyers also have the unique opportunity to go wrong again after the deal closes.) See what Dealroom and Investopedia say about that kind of unhappy ending.

Got more questions about how sellers can avoid killing M&A deals? Email us.
Revised 2/3/26. (c) Kuhn Capital 2026. All rights reserved