A few days before Christmas, a business owner calls me.
He’d just spent nearly a year selling his company with his accounting firm.
LOI signed, due diligence launched, contracts drafted… then the buyer withdrew.
Result: back to square one with a bill of about $50,000 sitting on his desk.
What he told me, I hear too often: “surprises” that emerged during due diligence undermined the buyer’s and the bank’s confidence.
Nothing intentionally hidden, but important elements not addressed at the right time, which end up weighing heavily.
What you really need to understand
Due diligence should validate, not discover.
When significant information emerges late, the buyer reassesses their risk.
They renegotiate, extend timelines… or withdraw.
The antidote is a structured sales process that puts cards on the table upfront, builds a defensible narrative, and aligns the professional’s compensation with your result (not billable hours).
1) Why does it derail when everyone is “serious”?
In most failures, it’s not bad faith that kills the transaction, it’s the orchestration.
We “kick the can down the road” on sensitive points: unfavorable EBITDA variation, client dependency, key departures, latent litigation, contracts to renew, forgotten capex…
These issues inevitably resurface — at the worst moment — when more people (banker, lawyers, accountants) are around the table and pressure is mounting.
Good reflex: address these elements before the LOI in a clear CIM (Confidential Information Memorandum), with explanations and mitigation measures.
Trust is built on the absence of surprises, not the absence of imperfections.
2) Aligning incentives: billable hours vs. success fees
A process can consume hundreds of hours without addressing the core risk if the advisor’s compensation isn’t tied to success.
At RCA, our model is 100% results-focused: 10% engagement fee to launch, 90% of our fees at closing, no monthly charges.
This structure forces us to defuse difficult issues early, because if you don’t get paid, neither do we.
It’s simple, and it avoids the “can-kicking” that undermines closing.
3) The defensible narrative: telling the truth… at the right time
Presenting your business “in its best light” isn’t about putting lipstick on a pig.
It means explaining.
A solid narrative exposes strengths, but also documents anomalies (atypical year, compressed margin, manager departure, client concentration) and proposes solutions: transition agreements, earn-outs, price adjustments, succession plans, etc.
It’s important to be rigorous and address all the details.
The same rigor applies to confidentiality. The entire process must be discreet to preserve your relationships with clients, suppliers, partners, and employees.
On this subject, see also: When to Inform Employees About Your Business Sale?
4) Closing a deal is a series of micro-agreements
You need to understand that a transaction is not a single agreement.
It’s a succession of micro-agreements (working capital adjustments, seller note terms, representations and warranties, transition timeline, etc.) that detail the initial agreement.
The role of an experienced business broker is to identify and orchestrate the resolution of untreated or unclear points: we transform irritants into acceptable solutions for both parties.
This pragmatic approach drives the sales process forward and increases the chances of completing the transaction.
Quantified impact
A “new” discovery during due diligence can hurt badly:
| Element discovered late | EBITDA effect | Perceived multiple | Impact on value |
|---|---|---|---|
| Loss of recurring client ($200k) | −$200k | from 4.5x to 4.0x | ≈ −$800k + multiple compression |
| Emergency recruitment (key position) | −$90k | stable | −$360k |
Reading: in addition to the mechanical effect on EBITDA, risk perception compresses the multiple.
Two blows to your value and troop morale.
A story that ends well
In the story that opened this article, we took over the mandate after the initial failure.
In less than a year, by addressing sensitive points from the start with concrete measures, the transaction closed.
The difference: a process aligned with results and communication without surprises.
The seller paid us from the sale proceeds of his business for the result he expected, to his great satisfaction.
And you? Who will you work with to sell your business?
Key takeaways:
- Due diligence validates, it doesn't discover — address sensitive points before the LOI in a transparent CIM
- Align incentives with a success-based compensation model (not billable hours)
- Build a defensible narrative that exposes strengths AND anomalies with concrete solutions
- Orchestrate micro-agreements with a broker who manages the process through closing
- Avoid late surprises that compress the multiple and undermine buyer confidence
