Business Brokering Buy Sell Business – Worldwide Business Brokers

Dishonest Sellers: Part Deux!

Dishonest Sellers: Part Deux!

Last week I shared the first half of a story about an experience we had with a less-than-honest seller and his equally ethically-challenged attorney.

Dishonest Seller
    Your client the bad guy!

Recall that these unscrupulous individuals had, on several occasions during and even after the due diligence period, tried to screw the buyer – and, by extension, us – on a $1.75 million transaction. Granted, this was not a large deal in the total scheme of things but it was a major purchase from the buyer’s standpoint. After all, it was the buyer’s money at risk. And, our reputation was on the line.

Last week’s post ended with the statement that the story had a positive ending – at least for us and the buyer. But this was possible only because the buyer was knowledgeable and paying attention – and because we fought to maintain our credibility and refused to dishonor ourselves or to buy into the seller’s disgraceful and dishonorable deception.

For his part, the buyer was in a pretty good position. The contract that we negotiated contained language that was fair to and had protections for both sides. The default sections of the purchase agreement were critical in this regard insofar as they specifically addressed what rights and obligations each side had in the event that one or the other defaulted.

In the jurisdiction where the business was domiciled, one of the remedies that the buyer had was the ability to file a public notice of a pending lawsuit. Were that to happen, the business would be tied up in the courts for at least a year. The sellers would not be able to sell and the lawsuit would have been very public which would have had a damaging impact on the business, thus reducing its value.

And, not surprisingly, if a lawsuit was filed, we’d be in the thick of it; the broker always is! Not being novices at this, we have developed a process that helps minimize the potential fallout for us if one or both of the parties files a lawsuit. We follow this process when selling any business, no matter its size.

By dint of the concise language in the purchase contract, the buyer held a fairly strong hand and he rightfully dug in his heels and would not close until the documents the purchase agreement required the seller to produce were, in fact, submitted. The seller caved – but not without more caterwauling than a second grade dust up or a meeting of the Turkish Parliament. The deal closed, we got paid, the buyer got a good business, the seller got his money and the attorney received a wet towel to wipe the egg off his face.

If you’re a business broker – or want to become one – you’ll run into a dishonest seller eventually and you should be ready. Our process is not complicated and any honest broker will see the benefits of using it. It breaks down into five components.

1) Disclaimers

Our documentation – all of it – carries a thorough disclaimer that clearly states where the information we provide originated – generally from the seller – and that we, in no way, take any responsibility for its accuracy. When we begin marketing a business that we’re representing, our marketing materials, any PowerPoint presentations that we develop, all collateral pieces, the Offering Memorandum and the abstract of that memorandum all have our disclaimer front and center.

Though we state that we believe the information is accurate, we don’t guaranty it. This is what the buyer’s due diligence period is for.

2) Documents

Have your “docs” in a row. As mentioned above, one of the critical aspects of a purchase contract is the section on defaults. Because a broker’s commission is dependent upon the other parties to the transaction performing according to the contract, we make ourselves party to the contract. Specifically, the contract calls for the the appropriate other party(ies) to pay our fee. We – and our agreement(s) with the parties – are specifically referenced in the purchase contract. When the parties sign the contract, they are acknowledging that we are owed a fee, how much that fee is, the underlying document that requires that fee, who is responsible for paying that fee and when that fee is due and payable.

3) Maintain the Buyer’s Trust

One of the most important aspects of this deal was that we maintained the buyer’s trust. We kept the buyer informed promptly of all developments, especially the bad ones. If you know what you’re doing, you’ll know when your client is trying to screw the buyer. In this case, we were able to point out to the seller that its position was entirely unethical or violated the spirit if not the language of the agreement. When the seller would not change course and get back on the ethical track, we were in a position to advise him to expect blow-back from the buyer and then listed the reasons. As the seller continued in its obstinance, we were in a position to commiserate with the buyer, assure the buyer that we can see things from his perspective and agree with his position and complaint, and promise to work to get the seller to do the right thing.

Promising the buyer that we would work to get the seller’s head out of his butt – and then being able to show the buyer what we were doing in that effort – was critical in being able to maintain the buyer’s trust. And THAT is critical from a reputational standpoint. A dishonest seller will usually have a history of dishonesty; you will not be the first person or business such a seller will have tried to screw and such a history usually means that the seller and his opinions are held in low regard. As such, the opinion that matters most in the long run will be the buyer’s.

And remember this: you are unlikely to ever work with the seller again. The buyer, on the other hand, will eventually sell the business. If you maintain the buyer’s trust throughout this process, who do you think he’ll call when it’s time to sell?

4) Due Diligence

Buyers do due diligence when they are considering buying a particular business. Sellers do due diligence when they are considering hiring a professional business brokers or M&A advisor. You do basic due diligence when a potential buyer contacts you about a business you are representing. You should also do some basic due diligence on your potential client – and its advisors – before taking on such an assignment.

Ask around in the business community by calling the Chamber of Commerce in the seller’s city. Check in industry circles, as well.

For instance, if a seller  comes to you about selling his equipment company, try to find out it he pays his suppliers on time. How many people and other companies are eager to work with him? This will give you a sense of the character of your potential client and a sense of whether or not you want to spend the time, energy and money that marketing any business entails.

And try to learn as much as you can about the reputation of the seller’s advisors, particularly the attorney and accountant. Though in my experience it’s rare to find crooked CPAs, O.J.’s attorneys might suggest that there may be the occasional questionable member of that profession. Keep your eyes open!

But even if your research suggests that your potential client is lower than snake poop, that may not automatically trigger a “thanks, but no thanks” response from you.


Well, maybe you’ve been working with a buyer whose criteria the seller’s business meets to the proverbial “T”. If you’ve got a ready-made buyer, no need to walk away from trying to make a deal work. But with some basic due diligence, you’ll know what you’re getting into and be better able to protect yourself.

5) Communication Methods

Finally, how you communicate with everyone involved – buyer, seller, their respective attorneys, accountants, executive assistants, etc. – is critical! Though this is important in ANY transaction, it is most important when you suspect that your seller is dishonest. And because, as I mentioned last week, you won’t know your seller is dishonest until the process has moved some distance along, this is a practice you should observe from Day One on any deal.

Use email and use a contact management program that allows you to link emails to certain individuals and projects. This will allow you to refer to statements made by various players involved in the deal, a fact that will help you avoid any “her-said, she-said” moments.

You may occasionally encounter some Neanderthal that does not use email. We no longer accept assignments from such fossils for two reasons: 1) they are an enormous waste of time and, 2) we’re worried that they refuse to use email because they don’t want to commit anything to writing. But if you choose to work with a seller that will not use email, keep copious and contemporaneous notes of every phone conversation, dated and time-stamped, and every face-to-face meeting. This practice alone saved the day in the transaction I’ve been describing.


Remember, dishonest sellers hire dodgy lawyers. Neither will display their true colors until you are well into the deal process, when you will have likely spent too much time and money to make bailing out palatable. As such, your due diligence would include getting some feedback from the business community on the seller’s advisors. Start with learning about the lawyer.

We need more honest and ethical intermediaries – brokers and advisors that understand the importance of treating all parties in a fair and impartial – but honorable – manner. If you’re interested in becoming a professional business broker, let me know here:

You can protect yourself and your practice from short-term and long-term financial and reputational harm by paying attention to the issues listed above. Professional business brokers have a duty of fair dealing with ALL parties involved in the transaction. Though we usually represent the seller, we are obligated to treat both sides with the highest ethical level possible. Doing so will burnish your reputation with the people that matter – community leaders, reputable and ethical business owners and their advisors.

If you have any questions, comments or feedback on this topic – or any topic related to business – I want to hear from you. Put them in the Comments box below. For example, if you’re considering an opportunity to become a professional business broker, what questions do you have? Start the conversation and I’ll get back to you with answers or my own comments. If I get enough on one topic, I’ll address them in a future post or podcast.

I’ll be back with you again next Monday. In the meantime, I hope you have a profitable week!


#business #howto #sellabusiness #becomeabusinessbroker #businessbrokering #businessvaluation

The author holds a certification from the International Business Brokers Association (IBBA) as a Certified Business Intermediary (CBI) and can be reached at jo*@Wo*******************.com

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