Does having multiple owners cause broken deals?

searcher profile

March 08, 2024

by a searcher in San Francisco, CA, USA

I'm currently in talks with a business with 3 siblings at the helm, all with equal ownership. My instinct is that this could risk the deal falling through if one of them gets cold feet. Has anyone seen, experienced, or navigated such complications?

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commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
^redacted‌, thank you for including me on this discussion. I have been financing business acquisitions for roughly 15 years now. If you meet with the sellers and have discussions with them, usually you can tell pretty early on if they are all aligned or not. The only time I have seen deals fall apart has been when the buyer has been dealing with a minority owner primarily and not dealing with the majority owner(s). So long as you have communication with the owners with a controlling interest, you should be fine from the standpoint the deal should not fall apart due to one owner pulling out. Also, if you are concerned I would check the operating agreement. Usually a controlling majority of the owners can sell the business and force the minority owners to sell as well. So long as that is the case you should be good. I have seen probably as many deals with multiple owners close over the years as I have those deals with individual owners. In fact, thinking back, it is possible more deals with individual owners have had the owners flake out for one reason or another than those where multiple owners have agreed to sell.
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Reply by a searcher
from Rice University in Houston, TX, USA
Luke Tatone‌ - thanks for the tag.

Gabriel - I've had 2 deals under LOI that have had multiple owners. One deal is still active, and one deal died for a reason other than multiple owners. In my experience, having multiple owners adds more complexities, but it hasn't caused the deal to die. My approach is 2 part. First before LOI, understand the owners' goals and why they want to sell. If I feel both owners are committed to selling, then I proceed to LOI. If one owner doesn't want to sell, then I see that as a deal killer and don't proceed until I am convinced all owners want to move toward selling.

Second, while under LOI, I focus on continuous, clear, and deliberate communication with the owners. Specifically, I send weekly emails to all owners (in one email) with their help needed for the week. Additionally, we define up front which (either, both) owner I should work with on which topic, and I work with that individual owner on those topic(s). Lastly, I seek to obtain buy-in from owners on topics that are related to their area and/or overall if all owners' approval is required.
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