“Do you smell that? Smoke? No, Money.”

Here is a contrarian idea that really shouldn’t be for sellers of businesses, at this time, when entering into serious discussions with a purchaser. How can you be absolutely sure that the individual you are negotiating with has the means and authority to pay you, as you mutually agree?

Preventative action: the seller and their adviser ask to see hard evidence or strong anecdotal information that their preferred bidder has the liquidity to meet their obligations BEFORE agreeing terms, and absolute clarity on who the “economic buyer(s)” of the business are including the funders. The individuals, who control the means, can sign off, approve, veto or will claim credit for the purchase of the business.

Contingent action: the seller terminates the sale agreement with the “economic buyer(s)” for a failure to complete and make payment, on the agreed dates.

In many small and mid-market sale situations, where the seller is using a debt facility to finance the purchase, the “economic buyer” of the business includes not just the buyer’s CEO and Board but the powerful voices on their bank’s home office Lending Committee.

Would you know, who that individual(s) are by name, what their decision-making process is under uncertainty and their ability to fulfil any agreement on YOUR preferred terms and timing? If you don’t, don’t complain when you are left waiting for extended approval.