Correct Order of Operations When Submitting an Offer
March 19, 2025
by a searcher from University of Michigan - Ann Arbor in Reno, NV, USA
Yet another good call with a business broker to acquire an HVAC company. I did not hear anything which was a "No" to me, and when I asked what the next steps are, I am told the next step is to submit an offer. No tax returns, just seller provided "PnLs," no call with the seller, first step is to submit an offer. The last time I did so did not work out well for me and tied up my 1% EMD for a month. To only get booted off the deal later.
How is this supposed to work?
In my opinion:
1. Initial call with Broker
2. Tax returns provided, NOT an internal company provided financial statement LOL
3. Phone call with seller to see if I even like the guy/gal
4. Submit a solid offer I actually mean vs one which I was pressured into by a Broker
It just seems like the seller would get upset when I point out that their supplied PnL's don't match what is on their tax returns, and that is what my lender is going to work off of....
from Massachusetts Institute of Technology in Boston, MA, USA
Your approach is a perfectly reasonable one for getting to an LOI , but on the same token you don't really have a view into what is happening in the seller/broker's deal making world beyond what you are told. So, might as well submit an offer and meet the broker where they are.
Furthermore, if you do make an offer, do make sure that you state the assumptions for your offer (for instance that the offer is based on the financials provided) and also state why you are a good buyer for this particular business - qualifications, background etc. And, on the letter instead of sending in a signed letter, leave it unsigned, and you can state that this offer is subject to review by attorney. If the offer is an attractive one for the seller, rest assured, they will come back and talk with you and then you start to have the real buyer-seller discussions, have a signed LOI and also move forward with diligence etc.!
from The University of North Carolina at Chapel Hill in Raleigh, NC, USA
But when you said HVAC, it immediately brought to mind the P/E roll up trend going on right now. The seller team could be focused on a strategic or PE buyer not someone who needs SBA lending (which is why I presume the push for tax returns).
But I've found in this game you have to move forward with limited and imperfect information. Maybe the company looks "good enough" so you put an offer forward knowing if they are inaccurate (or nefariously misrepresenting) then you can back out.
Either way you have to be willing to accept risks in this game and be smart about where (and when) you spend money. This is entrepreneurship afterall. Winners know when to accept risk and how to spend their limited resources. I realize this isn't a great tactical answer to your question but I think at the end of the day you are the one taking the risk and you have to be willing to move forward with the situation as it is, not as you would like it to be. in the end, trust your gut. I don't think your order is wrong - it's just not how this deal unfolded.