Prior to signing an LOI, we as advisors try to do as much diligence as possible on a counter-party, their financial capacity, and their motivations for doing a deal.  We ask ourselves questions like – does the deal make sense from a strategic perspective for the buyer, do they have the financing in place or do they need to raise the capital to close, is their ownership and leadership team on board or are there any other potential roadblocks?

It’s not our place to judge the motives of a buyer for doing a deal, but we do feel its our place to look for where there may be potential hurdles on a deal and to manage expectations with our clients.  In a perfect process, once an LOI is agreed to and signed both parties bear down to drive through the remaining diligence and definitive documentation and move to a close.  We try to make this window as short on the sell side as possible as moods change, capital markets move, and other events (like global pandemics) can influence whether we eventually get to a closing.

To manage all of this, we keep in constant communication with our buyers – typically 2-3 times per week if not daily in some cases to make sure that all facets of a deal are moving ahead and support a buyer in any way they need.  Is this a bit of self promotion and is it overkill at times – absolutely, but we have found that this communication plan keeps both parties engaged with their eyes on the prize.  We constantly receive feedback that other brokers and advisors will disengage post LOI and leave it to the buyer and seller to communicate through the details – then they are surprised when something minor turns into something major and the deal starts to go sideways.  Advisors without the proper background and context (and trust) often have an uphill climb to get deals back on track.

So how do we gauge if a deal is in trouble from the other side.  Simple – they stop communicating.  Large windows of non-communication time are a big red flag that there is a problem somewhere.  What does a “large window” mean – there is no hard and fast rule on it – its more of a gut feeling and based on what milestone point the discussion are at, but everyone has their phones with them 24/7 so its always a concern when someone doesn’t respond within a reasonable time period to calls/texts, even with a simple “got your message, still working through things internally” text.

So how do we handle this.  First – we try to set communication expectations early so its not a problem. Our Redcap&Truss team take pride in the fact that we are available 24/7 and have a lot of our calls on evenings and weekends.  We recognize not everyone works this way (probably a good thing), but we do try to understand work hours / habits so that we can manage expectations on both sides through our communications.  Second – we generally stay patient and polite.  Life happens and we get that, and our priorities are not always those of others.  Third, if our primary point of contact has gone cold, we will look to engage with another team member to inquire as to what is happening – this can be an other advisor, legal counsel or other employee.

Finally, if a major milestone has been missed and there has been no communication – we will look at what our deal options are under the LOI.  Unfortunately, some buyers like to keep their options open and slow play deals as they look at multiple deals simultaneously with an intention of only closing on some of them.  If we think that’s the case with our deals, we will look to amend the LOI and/or terminate it.  We don’t want to waste anyone’s time and we will get aggressive on terminating an LOI/exclusivity agreements if we believe this to be the case, especially if we believe there are other parties who may have continued interest in our seller.

Communication is a key determinant as to whether a deal gets done and we take the approach of more is always better.

We would love to hear your story – please feel free to contact us anytime (we are good with evenings and weekend chats).