All cash offer discount?

April 10, 2024

by a searcher from Harvard University - Harvard Business School in Portland, OR, USA

Has anyone successfully pushed through an all cash offer with a sizable discount? What was your discount off asking price (or off your first semi-cash offer)?
TIA!

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Reply by an intermediary
from Clemson University in Raleigh, NC, USA

The premise that a business buyer should get a discount for paying cash at closing is a fallacy. A properly valued business is worth what it is worth, and the seller should receive that at the time of sale. Any contingent consideration or additional financing negotiated should only be to mitigate legitimate buyer risks, Tax planning acceptable to the seller or for loan structuring optimization.

Put somewhat bluntly, a buyers inability to provide cash at closing commiserate with the businesses fair market value is the buyer’s problem - not the sellers. A buyer that can pay fair market value at closing is expected and not justification for any discount.

Reply by a searcher
in Alpharetta, GA, USA

I bought my business at a 25% discount to the offered value and paid cash (SBA plus equity) with no seller note. I believe if I had required a seller note I would’ve had to pay closer to the full offered price. Fair market value is only determined when a transaction is consummated, and if there’s no transaction, then there is no fair market value only a bid and an offer. So if an all cash bid results in a lower transaction price, then that is the fair market value of the business.

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