What It Costs to Have Only One Buyer

This happens often enough to be a pattern rather than a story.

A founder gets a call from a private equity firm. They are complimentary, they move quickly, and within weeks there is a number on the table. It is a real number from a real buyer and it arrived without her doing anything.

The advice is to turn it down and run a proper process. She does not take it, which is an entirely reasonable decision — a bird in the hand, and a process sounds like a year of work for an outcome nobody can promise.

Then diligence runs for months. The buyer’s team goes through the reporting and concludes it does not support the price they offered. So they retrade. The number comes down, far enough that the deal is no longer worth doing, and it dies there.

She then runs the process she had declined. It produces roughly 30% more than the number she almost accepted.

The year is the part she minds.

Illustrative of a recurring pattern. The figure is the conservative end of a real range.

The retrade is the whole point

Notice what actually killed that deal. Not a disagreement about value, and not fraud. The buyer made an offer, looked properly, decided the numbers did not carry it, and moved his own price.

He could do that because there was nobody else in the room.

A retrade is a test. The buyer is asking what happens if he lowers his number late, after you have spent months and told people, and the answer depends entirely on whether you have an alternative. With one buyer the answer is that you take it or you start over, and he already knows which.

This is why the single-buyer discount comes off in two bites rather than one.

The opening. A buyer who knows he is the only one looking has no reason to open at his number, because there is no second bid to lose to. He opens low because opening low is free. It is not an insult and it is not an error on his part.

The retrade, which arrives dressed as analysis. His accountants come back with risk. Customer concentration. A process that lives in one person’s head. Owner compensation that was never normalized. Revenue that depends on relationships you personally own.

Most owners are taken aback by that list, and the reason is worth sitting with: those risks do not exist while you own the company. You know the customer. You are the relationship. The buyer is pricing a version of your business that does not have you in it, and every gap in your reporting is somewhere he has to guess. He guesses against you, because guessing against you is what he is paid to do.

Together the two bites commonly take close to a third off a defensible value, and nothing about the company changed in between.

Which is why the reporting is the leverage

The reason the retrade stuck is that the data could not answer back.

A buyer does not need your reporting to be sophisticated. He needs it to be consistent and supportable: the same revenue by line every time he asks, every add-back with evidence behind it, a customer concentration figure that three people in your company would calculate the same way.

When it is, a retrade is a conversation you can win, because he has to argue with something rather than assert into a gap. When it is not, you are negotiating against a number you cannot defend, and the only move left is to accept or to walk.

You cannot build that evidence while diligence is running. You are being watched while you try, and the attempt reads worse than the original gap.

Why you cannot simply refuse

This catches people who negotiate well everywhere else.

You can hold your number and say it is final. But he has twenty other conversations running, several with owners in roughly your position, and he will work those until one accepts. Your refusal costs him a week. It costs you the only buyer you have, and you start again, months older, with a company that has been running on half your attention.

He is not being ruthless. His alternatives are genuinely better than yours, and he is pricing that.

The cost that never shows up as a line item

The months you spend on a sale are the exact months the buyer is examining.

If you are the largest single source of new revenue in your company — and in most owner-run businesses you are — the distraction lands in the trailing twelve months he is pricing. The process degrades the asset being sold. On a single-buyer deal that runs long and then dies, you pay for it twice: once in the lost year, and again in the numbers the next buyer sees.

What competition actually does

Not a bidding war. Those are rare and most owners will never see one.

Something narrower and more useful: it restores your ability to say no.

Every discount above works because you had no alternative. Put one real alternative in the room and each of them has to be argued rather than asserted. The low opening becomes a position he has to defend. The retrade becomes a negotiation instead of an ultimatum. The timeline stops being his.

You do not need five buyers. You need the credible possibility of a second one, and the buyer needs to believe it.

What this means if a buyer has already called you

An unsolicited offer is not luck. It is a process that has started without you, on someone else’s terms and timeline, and the terms are good for the person who set them.

That does not mean the buyer is wrong for you. It means you are being asked to transact before you have found out what the company is worth to anyone else, and the only way to find that out is to go and ask.

The bird in the hand is the most expensive animal in this business.

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This is what we do. Prism Edge runs sell-side processes for owners: getting the reporting to the point where it survives diligence, building the buyer universe so there is more than one number, and holding the line when the retrade comes. If someone has already called you, that is the moment to talk, not after.

And the full chapter on this is in Selling Your Business The Easy Way, free to download here.