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By Gregory Kovsky

John Martinka, as one of Seattle’s most successful, knowledgeable, & experienced buyer’s brokers, and I, as the President of IBA, the Pacific Northwest’s oldest business brokerage firm, have collaboratively completed a significant number of transactions involving the purchase & sale of privately held companies, including one already in 2017.   John & I work well together because we are both familiar with the landscape of the transaction process, desire to complete “win-win” transactions, and can serve as resources of what is standard and fair in a transaction.

One competitive edge John’s clients have in pursuit of a business acquisition is they are prepared for the competitive purchase environment presently found in the middle market.

Will Rogers famously said, “You Never Get a Second Chance to Make a First Impression”.

This statement is true in most sales environments and applies to an entrepreneur desiring to purchase a business through a business brokerage firm serving the middle market.  The reality of the current marketplace for privately held companies is that sellers have choices regarding potential buyers for profitable, established companies.   It is therefore prudent for a business buyer to take the steps necessary to separate themselves from the pack, if they want to successfully negotiate a letter of intent and secure first position status to purchase a specific company from a seller.

The following are five common characteristics of business buyers who have successful purchased privately held companies in deals I have facilitated during my 23 years as a business sale intermediary:

  1. Listen More Than You Talk – Most entrepreneurs are confident and have a substantial ego. A buyer who recognizes this will check their ego at the door when meeting a business owner and place the spotlight on the seller encouraging them to talk about the business and their own personal history.  Everyone likes to talk about themselves.   A business buyer who makes an impression with a seller of being a good listener and student early in a transaction generally will lay the groundwork for future “good faith” negotiations and a positive transition period relationship.    Conversely, a business buyer who spends a significant amount of a first meeting with a seller telling them how great they are often will be the party left on the wall when a transaction “dancing partner” is selected for negotiations by the business owner.
  1. Create an Environment of Transparency for the Transaction – A buyer’s due diligence prior to purchasing a privately held company will result in the seller being asked to share a significant amount of confidential information.  This can be an uncomfortable process for a seller because they will likely be asked to share information about their business that they share with very few people.  A buyer that recognizes that this “uncomfortable” situation is on the horizon for the seller, can mitigate the level of discomfort by taking the lead in disclosing information early in the process providing the seller, commonly through their broker, with a resume, personal financial statement, list of their transaction team members, and any other information relevant to the transaction that they deem would increase the seller’s comfort with them as a potential negotiating partner.  Conversely, a business buyer who is guarded in the information they will share with the business broker representing a company and their client, will often be categorized as unqualified rather than qualified as a default.   The most important information to share with a business broker and their client is information on financial strength, liquid assets that can be deployed in a transaction, access to acquisition capital, and relevant experience.
  1. Assemble a Transaction Team – The most common players on a business buyer’s transaction team are an attorney, CPA, and banker.  It is prudent for a business buyer to assemble this team prior to engaging with business owners, so they are prepared to negotiate in “good faith” and move forward in a timely manner.   A transaction can be lost by a business buyer if a timely turnaround time on a letter of intent, preliminary due diligence, or an assessment of financing capability is not possible.   Many times, I have witnessed good, qualified buyers lose out on business acquisitions, even as the preferred buyer on a personal level by a seller, because multiple offers were being simultaneously negotiated and their attorney was slow to turnaround a document, their CPA did not complete a valuation in time for their client to get an offer on the table, or because a buyer was deemed incapable of getting a loan because they could not generate a letter of commitment from their preferred lender.
  1. Negotiate in “Good Faith” and Minimize Direct Confrontation – Business buyers & sellers each have a vested interest in negotiating in their own “best interest” in a transaction. The most significant place this occurs is on price & terms.  Successful business buyers recognize that there is value in being liked by the seller and having them committed to a smooth transition of ownership.   A “win-lose” negotiation runs counter to having a seller in your camp after the transaction is completed.  It is my recommendation that buyers negotiate in a manner that allows them to achieve the necessary transaction terms while at the same time mitigating confrontation.   Strong business sale intermediaries and attorneys will also assist this process by making the negotiation more administrative and less emotional and minimizing direct engagement between the parties in negotiations. Buyers should also remember that if they walk away from the transaction they will not complete the acquisition and start the process all over again.   If a seller walks away, they still will own the company and continue to make money until a sale is completed.  In short, the default setting for business sale negotiation is generally better for the seller than the buyer.
  1. Hold Information in Strict Confidence – It is in the best interest of both a business buyer and seller to keep information related to the potential sale of a privately held company out of the public domain as long as possible. A buyer who breaks confidentiality about a sale or has someone they have shared information with break confidentiality can jeopardize their transaction, as a common default by a seller to protect the business is to disclaim the information and pull the business from the market if it is deemed the information could damage the business.   The Pacific Northwest is a small community.   In a recent transaction John & I facilitated, a banker on the approval team for a loan was a long-time customer of a business being sold that did not know the company was for sale.  The sale came as a surprise to him.  The story had a happy ending, but is a prime example of how inadvertently information about a business sale can become known to a customer despite the best intentions of the parties.

Poor practices regarding confidentiality can also damage a business buyer’s relationship with a business brokerage firm.   IBA has a policy to disclose past confidentiality issues with a specific buyer to our clients prior to disclosing information to the party about a specific company being for sale.  It is common after that disclosure for our clients to indicate they do not wish for that party to receive information on their company.

As Will Rogers said, “You do not get a second chance to make a first impression.”  My recommendation to all buyers desiring to purchase a privately held company is to make the best first impression possible on the business broker representing the business and their client and to employ “best practices” whenever possible throughout the negotiation & acquisition process.

Gregory Kovsky is the President & CEO of IBA (  IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.  Mr. Kovsky can be reached at (425) 454-3052 or   Questions regarding IBA or the purchase & sale of privately held companies are welcome.

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