Where Exits Go Sideways (and How to Stop It)
Selling a company isn’t a just a victory lap (thought it can be that) - it’s a high-stakes project with moving parts, competing incentives, and a clock. Owners who care about their legacy, people, and proceeds need a disciplined approach to buyer selection, disclosure, and negotiation. As a long-term hold investor group staffed by former operators, we’ve seen great businesses lose value in process, not performance. The patterns are predictable—and avoidable.
Below are four common mistakes that derail outcomes, plus the practical counter-moves that preserve value and relationships.
Mistake 1: Treating the headline number as everything
The price on the LOI is not your payout. The expected value of any exclusive diligence is:
Headline Price × Probability of Close × (Quality of Structure & Rollover Value)
If the relationship with your buyer is weak—or you don’t understand their operating capabilities—your rollover equity may be worth far less than you think. Structure can quietly overpower price:
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Rollover equity: Only valuable if you trust the post-close plan and the people running it.
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Earnouts and seller notes: Can create misalignment or delay cash if poorly designed.
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Working capital targets & indemnities: Small drafting choices can move millions.
What to do instead
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Underwrite the buyer, not just the bid. Who will run the business? What’s their track record with rollovers? Ask for references from past sellers.
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Model expected value. Adjust for closing risk and realistic performance of contingent payouts.
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Bias toward partnership fit. The best outcomes we see come from sellers who value strong ongoing relationships with buyers they trust.
Mistake 2: Playing hide-and-seek with issues
Trying to obfuscate financial, legal, cultural, or operational problems is the fastest way to poison a deal. Experienced buyers are trained to chase small anomalies. Even faint “something’s off” signals trigger deeper digs that they may not have otherwise conducted. Serious buyers backchannel (without violating NDAs) with customers, competitors, ex-employees, major vendors, insurers, and sometimes regulators to pressure-test what they’re being told and your reputation.
Nothing frustrates buyers like discovering, two months into diligence, a fact that should have been disclosed on the first call. Trust collapses; structure tightens; deals die.
What to do instead
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Lead with candor. Put the warts on the table early, with context and mitigation.
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Package diligence. Clean data room, clear versions, tight audit trail.
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Adopt a “same team” stance. Treat buyers like future partners solving a shared problem: How do we close a fair deal quickly?
Mistake 3: Turning negotiations into trench warfare
Odds are your buyer wants you post-close—at least for a transition period. That relationship starts in diligence. Over-lawyered, TV-drama posturing wastes time, burns goodwill, and can kill momentum.
A common failure mode: a seller hires a litigator or generalist who is both over-aggressive and unfamiliar with M&A norms. Without context, they fight battles that don’t matter and miss the ones that do.
What to do instead
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Hire transaction counsel. Choose lawyers who do deals for a living. They know what’s “market,” what’s signal vs. noise, and where to push.
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Trade, don’t batter. Prioritize 3–5 non-negotiables. Be flexible on the rest.
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Preserve the working relationship. You may be partners tomorrow. Negotiate like you’ll need to work together—because you will.
Mistake 4: Underestimating the damage of a busted process
A failed exclusivity isn’t a reset button—it’s a scarlet letter. Other buyers will find out and assume the first group uncovered something fatal. That elevates perceived risk, invites heavier diligence, and often pushes terms toward tighter escrows, tougher reps, and lower cash at close.
What to do instead
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Vet early, commit carefully. Before signing exclusivity, conduct your own diligence on the buyer’s capital, process, and operating plan.
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Stage-gate go/no-go. Set internal checkpoints for quality of earnings, customer work, legal review, and management chemistry.
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Control the narrative. If a process does break, be ready with a factual, consistent explanation and evidence of remediation.
Summary: You and the buyer are on the same team—act like it
At the end of the day, the whole process is about relationship. Become genuine partners and the deal goes better. Be honest, be transparent, and work together to arrive at terms that make sense for everyone. Yes, your incentives differ—but your buyer is accountable to LPs and can only pay—and defend—a strong price if the story is clear and the risks are contained.
Work with them to justify that price. They are looking for reasons your company kicks butt. Find those reasons together—without hiding the downsides—and you’ll protect what matters most: your people, your legacy, and your proceeds.
