Why do businesses fail to sell?

September 29, 2015

Why do businesses fail to sell? 

With almost 90% of business sales collapsing (based on a recent survey by our team at Bluebox), we are often asked what causes a failed sale process.  Are there common themes of failure and, if so, are there things that shareholders can do in advance of their exit to maximise their chance of sale, and also enhance the price they achieve?

The answer is that deals can collapse as a result of one of a number of reasons, many of which are completely within your control.  When Bluebox was created, we wanted to explore the reasons behind failed sale processes and assist business owners, at this critical stage of their business, to ensure that they were properly prepared for their best possible exit; an event which is often seen as the climax of their business career.

We have spent the last year assessing the numerous failed sale processes and analysing why these deals collapsed.  The results were interesting in so far as many of the reasons for failed processes could have been tackled by business owners prior to heading for exit.   Tackling issues earlier would, in our view, have more than doubled the chance of a successful exit.  There is so much that business owners can do.

We identified the main reasons for failure as follows:

  • Issues arising in due diligence
  • Starting a sale process with unrealistic pricing expectations
  • Conflicts arising as a result of misaligned management and shareholders
  • Lack of systems, resulting in low confidence in trading results
  • Trading issues during a sale process; and
  • Lack of an experienced advisor to assist with the exercise

Given the 90% statistic I referred to earlier, it is amazing that shareholders don’t address these issues head on.

Here at Bluebox we have analysed the issues that arise and have created a structured approach to dealing with them.  The ‘raison d’etre’ of Bluebox is to ensure that these business owners enter a sale process with a fighting chance of success.

We hope that many business owners join our crusade and that we can improve the way in which businesses are sold in this market.

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