Get Your Acquisition Closed Before the End of the Year

Before we dive in, a quick note:

I have a business called SMB Business Plans, and my business partner Joe Thomas will be speaking at the Entrepreneurship Through Acquisition Conference at the University of Minnesota on November 15th in Minneapolis. To find out more info and reserve a ticket, click here.

Get Your Acquisition Closed Before the End of the Year

A few weeks ago, I wrote an email about how to get your deal done before the end of the year.

And today (October 1st) is the magic day.

Back in August, I said that you need to have a signed LOI in hand by October 1st if you wanted to be on track to close by the end of 2024.

So, are you on track?

Some of you are probably in the middle of negotiating deals that are dragging on a bit longer than you thought.

"Of course we'll get it done by end of year," you tell yourself. "There's so much time left!"

But are you sure about that? Deals can drag on. If you don't hit certain milestones soon, your deal probably won't close before year-end.

How can you make sure your deal gets closed over the next 3 months so that you're ready to hit the ground running in 2025?

Let me tell you, it's demoralizing to have a deal drag on passed the start of the new year. Everyone wants to close before January 1st so that they can have a clean slate to operate and grow the business for a full calendar year.

I put together a list of everything you'll need to get done, and by when, if you want to close your deal by the end of 2024.

Have a signed LOI in hand by October 1st

Most of the time it takes about 70 to 90 days to go through the SBA underwriting process. Having a signed LOI by today gives you just enough time to go through the underwriting process (hopefully).

In my experience, deals rarely take longer than 90 days to close after the LOI is signed. And with the finish line in sight, the seller will also be eager to close the deal before the holidays!

Assemble your deal team (by the time you have a signed LOI)

You really want to know who makes up your deal team, including:

• M&A attorney
• Financial due diligence provider
• SBA financing specialist

You should have this team assembled by the time the LOI is signed.

On the SBA financing side specifically, it’s critical to either know what lender(s) you plan to run your deal by once your under signed LOI or which loan consultant/loan broker you plan to work with.

Please note that some loan consultants might require you to sign an exclusivity agreement to work with them. Pioneer Capital Advisory does not require this.

Tips for assembling your team:

• Reach out to other current and/or former searchers to solicit recommendations
• Ask for references or reviews from former clients of the service providers
• Review Google reviews of the service providers to see what former clients have had to say about working with them

Understand where the equity will come from to fund your deal

If you are going to need to raise equity for your deal, you should have a general idea of either who the investors will be in your ownership group and/or where you plan to go for your equity raise for the business acquisition.

If you get past the LOI stage and still have no idea where your equity will come from, I doubt your deal will get done (unless you have a great network of investors who like and trust you).

The equity raise is the process of raising down payment funds for your business acquisition. It takes time and it involves having to negotiate terms with investors. Investors usually won't invest in a rushed, last-minute deal where the operator desperately needs the funds ASAP to close.

If you have an idea of whom your investors will be for your deal, you can move faster than having to go out to the market to find investors and pitching your deal to them.

Deals can die if they hinge on the equity raise. If you as the searcher/buyer don’t have the ability to raise the down payment funds that you need platforms like Main Shares or SMB Junction can be useful to get your deal in front of accredited investors.
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Understand regulatory obstacles of your deal

Business licensing: If you’re buying a business in the trades space (for example), there are typically very specific requirements surrounding who needs to qualify various licenses (take HVAC, for example). You need to know what the process is to either 1) have someone in the business post-closing that can be the qualifier of the license or 2) what the process looks like to obtain licensing in your name to be the qualifier

Tax Clearance documentation: It’s critical to know based on the state that you’re buying a business in if you as the buyer need to obtain documentation from the state showing that there aren’t any obligations to the department of revenue from the seller after closing. It’s important to know how long this process takes and who is involved ahead of time. Not understanding this process can stall or kill your deal if you wait until the last minute!

Knowing that you’re ready to take the leap

If you’re working a job that has great benefits and a good salary, you need to know in your heart that you’re ready to leave

I have seen a last-minute change of heart play out. A buyer came to the realization just a day before closing that he wasn’t actually ready to leave his job. The closing documents had been sent to the closing attorney and everything was ready to go, but he backed out at the very last moment. A lot of legal fees and time from multiple parties went into this deal that ultimately died.

Buying a business, especially if you’re taking out an SBA loan that is personally guaranteed, takes a tremendous amount of belief in yourself and the business that you’re buying.

It’s perfectly okay if you never buy a business. But if you’re planning to go through the process and follow through on all the steps, you need to know deep down that this is for you

Utilize your self awareness to discern if entrepreneurship through acquisition is actually the right choice for you. It very well might not be!

Thanks for reading! Feel free to reply to contact us for any additioanl questions.

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