Lessons From the Deals That Didn't Close

A seller once got so insistent on an all-cash deal that he was willing to accept much less than the original offer price to get it. A couple of weeks before closing, a court search showed why. He was getting ready to be convicted of a white collar crime. That story from CPA Alex Lopez is one of seven I pulled together for this special best of episode of the DealQuest Podcast, all about the deals that didn't close.

After four decades of doing deals, I can tell you the saying every deal lawyer lives by is "it ain't done until it's done." This year, Aaron Single of Voyager, Andrew Dunlap of Harbor, Alex Lopez, Victoria Pelletier, Sean Weisbrot of SparkFox, Babu Sivadasan of Jiffy AI, and David Horwich of Horwich Strategic Advisors each shared a deal that fell apart and what it taught them. Whether you're buying a company, selling one, or raising capital, these stories show where deals break and how to protect yourself before they do.

It Ain't Done Until It's Done

We spend a lot of time on this show talking about deals that close. This episode goes the other direction. Over the past several months, guest after guest shared stories about a deal that fell apart at the signing table, a buyer who got blindsided, a seller who was hiding something, or money that was promised and never showed up.

Every one of those stories came with a lesson, and every one of these guests kept going after the deal died. That second part matters as much as the first.

A $200 Million Raise That Fell Apart at Signing

Aaron Single is the founder and CEO of Voyager, which makes long-term minority investments in independent wealth management firms. When I asked about the first deal he was ever involved in, I expected a success story. Instead he told me about a capital raise of about $200 million for a fund, worked over roughly 18 months with a very large family office.

They had negotiated terms and were at signing when the family office went through a major leadership change at the top, and the deal fell apart from there. "You can't force them and you can't be married to them," Aaron said, because people who get married to deals make the wrong decisions. His answer is resilience, a robust pipeline, and waiting for the right deal at the right time.

When Someone Else Buys the Parent Company

Andrew Dunlap is the founder and CEO of Harbor, a holding company that buys established Virginia businesses to keep them in Virginia. He was getting close to a deal with a manufacturing company in Roanoke, where he lives, when the broker called and said everything was on pause. Nobody could tell him why.

Months later, Andrew found the answer in the news. Samsung had bought the company's European parent, and everything stopped while Samsung got its hands around the business. Andrew summed it up the way any experienced dealmaker would. Until it's signed and the money is wired, you're not finished.

Be Transparent Without Oversharing

Andrew's second story left a scar. Harbor spent about six months courting another company, and to make the owners comfortable with Harbor as the buyer, Andrew shared his post-acquisition plan, including a partnership with another company. The deal died suddenly. A couple of months later, the target announced it had merged with that same company.

"Be transparent, but don't overshare or else you will just get cut out of the solution," Andrew said. It's a line every buyer has to walk. My own view is that when people behave that way, it's probably a good thing you didn't end up in business with them. You can hear more about how Harbor approaches acquisitions in Andrew's full conversation on building a permanent home for Virginia businesses.

One Ratio Can Change Everything

Alex Lopez is a CPA who spent years as a financial auditor at a global firm, and his practice now focuses on CFO services, due diligence, and tax minimization. On one buy-side deal, his team had proof of cash, the customer agreements, and physical observation of the assets. Everything looked perfect except one ratio related to insurance, which only got a half answer.

That ratio turned out to be a multimillion dollar problem. The seller had effectively cheated on some of the insurance applications, and the real cost of the coverage was several times what the buyer expected. The deal no longer made sense, and they pulled out. Alex admitted they had been a bit blinded by everything else that looked good.

When a Seller Suddenly Wants All Cash

On another deal, Alex's client made a competitive leveraged offer, and the seller was interested. Then, at the LOI stage, the seller insisted on cash and was willing to accept much less than the original offer price to get it.

That insistence felt off. A couple of weeks before closing, the team uncovered that the seller was getting ready to be convicted of a white collar crime and needed cash to get his affairs in order. "I thank God for court searches," Alex said. When the economics of a deal change suddenly, the reason deserves a hard look. Alex walks through more of his approach in his full conversation on due diligence, tax strategy, and deal structuring.

Due Diligence Doesn't Catch Everything

Victoria Pelletier has been involved in more than 40 M&A transactions and has bought and sold companies of her own, starting with a casting agency she bought at age 20. The third company she bought and sold went poorly because the woman she bought it from misrepresented things through due diligence, and Victoria had to take legal action.

She came out of it and reflected on what she could have done differently. Her experience is a reminder that even a careful diligence process can miss things when the other side misrepresents the business.

A Commitment Is Not Money in the Bank

Sometimes the problem sits on your own side of the deal. Sean Weisbrot, the founder of SparkFox, spent 10 years in China raising money for other companies before building a software company of his own. He put in $650,000 of his own money and raised a $1 million seed round. A friend he had known for six years committed $500,000 and sent $100,000.

Sean budgeted and planned new hires around the full round, and he says the $400,000 gap was a massive part of why the company failed. When he went looking for other investors, they heard the company needed money and stayed away. Sean is candid about his own role too, and he splits the blame evenly between his own inexperience and the missing money. His full conversation on smarter capital raising goes deeper into what he learned.

Right Idea, Wrong Time

Babu Sivadasan helped build Stamps.com and Envestnet, two companies that went public, and he is now building Jiffy AI. Back in the 90s, his team patented a way to turn any piece of software into a subscription product using usage-based metering.

They believed a low recurring price would make software accessible to more people. The software companies they pitched saw it differently and said they were already a subscription business, since customers paid upfront and were pushed to upgrade every year. Babu's team came away with nothing to show for it, and the rest of the world came around to subscriptions later.

The Deal That Paid Off by Not Happening

I saved my favorite story for last. In the mid-80s, David Horwich, who now runs Horwich Strategic Advisors, was at a transportation equipment leasing firm in San Francisco that could raise investor money at a remarkable clip. The firm planned an alternative energy facility in Montana that would run on waste coal, and the Montana Power Company was required by law to buy the power.

As the project moved toward construction financing, the Montana Power Company told David it didn't need the power and would buy the contract instead. It did, and the firm made a whole big pile of money on a power plant that never got built. Sometimes the deal that never happens works out just fine.

Keep Going After the Deal Dies

Every guest in this episode lost a deal, and every one of them kept going. Aaron is building Voyager. Andrew is buying Virginia companies and still hoping the Roanoke deal comes back. Alex is out buying firms of his own, and Victoria, Sean, Babu, and David have all moved on to what's next.

If you're in the middle of a deal that just went sideways, remember what Aaron said. You can't be married to it. Build your pipeline, do your homework, and wait for the right one at the right time. Aaron's full conversation is coming soon as part of a special series on RIA buyers.

WANT TO BE A GUEST ON DEALQUEST? Apply here: https://beaguestondealquest.com/guest

Listen to the DealQuest Podcast episodes here: https://beaguestondealquest.com/#topics

FOR MORE ON THE FEATURED GUESTS

• Andrew Dunlap: https://beaguestondealquest.com/episodes/415-building-a-permanent-home-for-virginia-businesses/
• Alex Lopez: https://beaguestondealquest.com/episodes/407-due-diligence-tax-strategy-and-deal-structuring/
• Victoria Pelletier: https://beaguestondealquest.com/episodes/413-mastering-the-people-side-of-deal-driven-growth/
• Sean Weisbrot: https://beaguestondealquest.com/episodes/414-from-china-to-sparkvox/
• Babu Sivadasan: https://beaguestondealquest.com/episodes/417-from-nine-rejections-to-two-ipos/
• David Horwich: https://beaguestondealquest.com/episodes/411-think-like-a-buyer-not-an-owner/

FOR MORE ON COREY KUPFER https://www.linkedin.com/in/coreykupfer/ https://www.coreykupfer.com/

Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

Get deal-ready with the DealQuest Podcast with Corey Kupfer, where like-minded entrepreneurs and business leaders converge, share insights and challenges, and success stories. Equip yourself with the tools, resources, and support necessary to navigate the complex yet rewarding world of dealmaking. Dive into the world of deal-driven growth today!