How bad brokers kill good deals - a case study
March 28, 2025
by a searcher from INSEAD in San Francisco, CA, USA
Thought this group might be interested in a recent experience I had where a good company with sound fundamentals ended up getting de-listed - IMO, largely due to broker incompetence.
Mistake #1: Don’t lock the doors before the party starts.
When the business was initially listed, it generated a lot of interest. However, the broker made the decision to only accept offers from “strategic” buyers and PE groups. That effectively cut out the majority of serious, qualified solo buyers.
Mistake #2: Hope is not a strategy.
Rather than re-listing the business or reaching out to the original set of interested buyers once the strategics passed, the broker let the deal sit idle for months. I was part of that first group told “no thanks” and noticed months later that there was still no “pending” sign on the listing. I reached back out - and still got radio silence for a week before he finally replied.
Mistake #3: A bird in the hand is worth two in the bush.
After providing proof of funds, going back and forth multiple times on an IOI (at the broker’s request), participating in a seller call, and scheduling an in-person meeting, the broker informed us - just days before - that the seller had accepted another offer last-minute for a bit more cash. Greed turned to fear when that new buyer couldn’t secure financing, and the broker came back asking if I could still do the deal.
Mistake #4: When you dig yourself into a hole, stop digging.
I agreed to re-engage. The broker asked for detailed financials. I sent them. Then he told me, in so many words, “I don’t believe you. After the last buyer fell through, I want to be sure you can close.” This was after I had already provided a full PFS and a bank pre-approval. I asked for a seller meeting before sending anything further. He refused. So I passed - there clearly wasn’t mutual trust.
The result? The listing was quietly de-listed with no explanation. No sale. No LOI. Just dead.
from The University of Chicago in Chicago, IL, USA
Let me share a similar example.
I am in Chicago. A buyer-client of mine was buying an add-on business in Long Island, NY. Seller's attorney asked for my buyer's financials. We sent that. After reviewing, the attorney advised his client, the seller, that my buyer-client had no money and hence advised against my buyer. My client was a strategic buyer, much larger, and very profitable. The attorney used insulting language in his rejection. I got on the plane to NY w/o my client (with a baseball bat, in my mind). Met the attorney and the seller. Had a heated discussion. Trapped the attorney in his own logic and his finance skills. Got the deal done.
My main point is that we as brokers are not in full control of the deal. Brokers are on 100% commission. I have been in this business for 35 years. I teach at associations and have been the boards. I have yet to hear about a broker who killed the deal.
Searchers are no saint either. Recently, I worked on a deal for 18 months. The day before the closing, the searcher buyer was short $100 k on a $8 M deal. Seller and his wife (who was uncomfortable with searcher leverage) decided not to sell to a buyer who cannot bridge $100 k on a $8 M deal. They are so upset that, despite being 80, now they do not want to sell.
from INSEAD in San Francisco, CA, USA
"Hey Jason, Your letter was a complete embarrassment—it was poorly written and downright pathetic.
Attached is what a real Personal Financial Statement looks like. Notice the massive difference? That’s what genuine credibility looks like. Don’t ever try to pass off something so weak and unconvincing again—it reflects a total lack of maturity, intelligence, and integrity. You should be thoroughly ashamed of yourself.
Frankly, my guess is that you’ll probably attempt this stunt again, and it’s only a matter of time before you end up in jail—it’s called fraud.
Financial fraud is defined as: Any illegal activity intended to deceive individuals or organizations for monetary or financial gain—typically through theft, misrepresentation, or the manipulation of financial information.
Sooner or later, someone is going to report you, and you’ll have to face the consequences, “get you shit together kid” Consider this your wake-up call."