What red flags do you look out for in a deal?

by an intermediary from Dartmouth College - Tuck School of Business at Dartmouth

5 years ago

What red flags do you watch out for when evaluating a company, both before and after an LOI is signed?

In full transparency, Tuck Advisors represents entrepreneurs who want to sell their company. We want to make sure that before we take on a client we're looking out for the same things you are. We also do a pre-M&A program for folks who want to sell in a few years, so to the extent possible we want to address those red flags during that program.

Thank you!  

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10 comments

searcher from University of Pennsylvania - The Wharton School

Having gone through a failed deal, I think the first thing to evaluate after LOI is if there is cash proof. The revenue was 2x overstated in the books, and it would have saved a lot of effort

2 months ago | like reply | 0 likes

investor from Stanford University

Hi James, Pre-LOI we look for inconsistent financials, declining revenue, high customer concentration, legal issues. Also making sure the seller is motivated to sell and not just fishing around. Post-LOI some red flags might be reluctance form seller to give details documentation, undisclosed liabilities, significant staff turnover, operational inefficiencies that were not initially apparent. Make sure the due diligence doesn't reveal overly optimistic growth projections or unrealistic synergies, etc. Hope this helps. Best,

2 months ago | like reply | 0 likes

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