Can anyone figure out what's going on here?
August 28, 2023
by a searcher from Rutgers-The State University of New Jersey-Newark/New Brunswick - Rutgers Business School in Warren, NJ 07059, USA
I'm relatively new to searching, so I'd love your perspective on what I'm missing here.
I am searching for a B2B services business in a specific industry, and have identified a business for sale that's squarely in my wheelhouse. I found it on a broker's website, and had a phone call with the broker less than a week and a half ago to get initial information about the company. After the call, they sent me the detailed information about the business, as well as a Deal Room with detailed financials, documented policies, etc.
After reviewing the materials (within 2 business days of the broker call), I emailed the broker with some follow up questions and a request to speak with the business owner. I was told that there were two other offers already made so the business owner would likely not be interested in speaking to me, and referring me to the Deal Room content for my questions. After reviewing that content in further depth (for the record, it did not answer my questions), I sent an IOI later that evening based exclusively on the Deal Room data.
After radio silence for a week, I reached out to follow up, and the broker responded that the two other offers are "working with a lender", so my offer was de-prioritized by the seller. I am totally confused. Does it make sense that two other potential buyers would both be actively seeking a loan without an exclusive LOI? I am in a position where I would be able to fund the deal without a loan, so I'm considering offering that as an option, but I don't know if there's something else that I'm not seeing here.
I should mention that based on the deal room documents, it looks like this business has been on the market for over 6 months. I haven't been searching that long so it's possible it was listed, de-listed, and re-listed. Thanks!
from University of Texas in Boulder, CO, USA
If that doesn’t work, perhaps the real reason is some combination of what ^redacted laid out and probably that the seller liked (clicked with) one or both of the other two potential buyers who presumably did get to do a seller call/meeting. Brokers do have to protect their time and the sellers’ and sometimes make incorrect snap judgments about buyers. And if their client is tired of having folks paraded around to them, I can see that.
I’m not sure of the answer: but do certified brokers have the obligation to put offers received to their clients? From my perspective, I see now downside/cost/time wasted for the broker to tell the sellers there’s a late offer from someone you didn’t meet and let the owner say no.
from New York University in New Jersey, USA
(1) I also have seen multiple situations where owners have received multiple non-exclusive LOIs shortly after listing. I assume the benefit to the quick-trigger buyer is a certain likelihood of locking in the mindshare of the seller, hoping to jump into due diligence quickly and re-trade their offer while "benefiting" the seller by providing a rapid process.
(2) My experience over the term of my search that, while most brokers are aggressive in posting new listings publicly as soon as possible, some may delay the postings while reaching out to strategic buyers with whom they have prior relationships. Those of us who are first-time buyers or new to those brokers may have a very short window to respond. Good brokers with the seller's interest in mind should allow a reasonable time for multiple buyers to be considered.
For your next step, one strategy would be to offer an all-cash LOI offer, based on a multiple of SDE as confirmed by due diligence. That would provide the broker with a solid alternative to the current offers while protecting you from any financial items you discover later.