War Story: Don’t Let Your Competition Fool You

As you get deeper into entrepreneurship through acquisition, you're going to find yourself in competition with other buyers. It can be hard to know when the intentions of other buyers are genuine, when to compete with their offers, or when to back down.

I was in a situation like this with a portable toilet and septic tank service business in North Dakota with a $1.2 Million EBITDA. My business partner and I loved the business, but the location was a risk for us. We hung around the rim of the deal though because the core business was strong. The broker eventually revealed that there were two offers in addition to ours. We were all in similar places with small differences in deal structure or purchase price. They asked if we could come up on our price, but we had already been looking at the deal for a while and only moved marginally. We went through this back and forth for some time and then something happened that changed the whole deal.

The owners said they were going to make their decision on a Wednesday at noon. That Tuesday night, we found out from the broker that another buyer took their offer up--not 5 or 10%--but 25%! I couldn’t believe it. I instantly questioned what the other party could have found to make them increase their offer so much. I was too young to realize, but my partner stopped me right there. He immediately knew the other buyer was bluffing. The buyer was trying to block us out of the deal by raising their price by 25%. They wanted to secure the deal under a letter of intent. After that, they planned to find something in diligence to knock the price back down. My partner said that if we just waited for that to happen in three to six weeks, we might still be able to make a deal.

And, that’s exactly what happened. Nobody's honestly raising their price 25% the night before the deal. It's just not practical.

Throughout the acquisition process, deals can twist, turn, and surprise you. Always stay on your toes and make sure to spot a dead deal fast! In my new white paper, I list seven times when you know your deal is dead. Know these possibilities now so you can recognize when it’s happening to you. This will save you wasted time that you could be spending finding the deal that’s actually right for you.