The term you'd never have accepted on day one

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The broad economics of a deal are usually settled early. Then the warranties tighten, the working capital target creeps up, the earn-out definition shifts, and the monthly numbers come in soft because you were busy selling. Each change looks small. Together they rewrite the deal you agreed to, unless you’re still prepared to walk.

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It usually happens late, often in the last fortnight before completion. The lawyers send through what they call a few final points. The period in which the buyer can make claims against you has grown from 18 months to three years. The amount of working capital you have to leave in the business has crept up. The wording that decides whether you’re paid your earn-out has changed. Each change comes with a reasonable explanation, and everyone involved has been at this for six months and would like to go home.

The owner signs. None of the changes was large. Together, they’ve rewritten the deal.

Bad deals happen late

The broad economics of a sale are often reasonably clear early on. The damage accumulates afterwards. A tighter warranty here, a larger working capital target there. An earn-out definition that shifts. A new obligation to keep certain staff. Money held in escrow for longer. A condition for completion that becomes more open to interpretation.

Each point seems manageable. Together they materially alter the deal, and that’s why somebody on your side needs to keep a live view of the whole thing rather than negotiating each clause in isolation. Keep coming back to the same few lines: how much arrives at completion, how much is deferred, how much depends on performance, how much is exposed to claims and for how long, and what obligations you’re left with. Then ask what has changed since the original offer.

If the answer has moved materially, say so, out loud, to your advisers. The transaction you’re about to sign may no longer be the transaction you agreed in principle.

Deal fatigue is real

Sales take longer than owners expect. Questions repeat. Documents get redrafted. People argue over definitions that seemed settled three weeks earlier. New advisers join and reopen old points. The buyer asks for one more analysis, a lawyer adds another protection, and the owner still has a business to run. Eventually, everybody is tired.

That is when poor decisions happen. A seller agrees to a term simply to finish. A buyer pushes a late price adjustment, knowing the resistance has gone out of the room. “Just get it done” becomes the operating principle.

Late concessions are still concessions. A $500,000 change accepted because everybody is exhausted is still $500,000. Build enough time into the process that the people making decisions stay fresh, and take every major change back to first principles: what changed, why, and what it does to the money. Then ask the question that cuts through most of it: would you accept this term if it had appeared on day one?

Don’t stop running the business

A sale eats management attention. There are adviser meetings, document requests, forecasts, buyer questions, presentations, legal calls, and endless requests for another version of something you thought you’d already supplied. Meanwhile somebody still has to run the company, and one of the most damaging things a seller can do is become so absorbed in the deal that the business underneath it slips.

Sales slow. Customers take longer to pay. The pipeline thins. A key hire gets postponed because “the buyer can deal with that”. Maintenance gets put off. Then the latest monthly numbers arrive, and the buyer isn’t acquiring the company you presented three months earlier anymore. They’re acquiring this one.

Nothing gives a buyer more bargaining power than performance slipping while the seller grows more committed to completing. Your job throughout the sale is still to run the business, and preferably to run it better than you were before it started.

There’s a business that barely notices any of this. The owner can step away for a fortnight and key people can take their holidays without anything slipping, because the work runs on systems and on managers who make their own decisions. That business can give the sale all the time it needs, from you and from whoever is helping you, without operations feeling it. It’s the business a buyer most wants to own, and it’s where all the preparation before a sale is meant to get you.

Know your walk-away before emotion arrives

Every seller should know what would make them stop. Before negotiation, before exclusivity, before the legal fees mount, and before the whole family has mentally spent the money.

A walk-away isn’t only a minimum price. It can be about structure. You may refuse to have more than a certain share of the price depend on targets after the sale. You may refuse to stay on as an employee for three years. You may insist on a minimum amount of cash on the day. You may refuse certain indemnities, the promises to cover particular losses if they arise, or any liability without a cap. You may insist on a defined handover period, or reject a buyer whose funding isn’t certain.

Write those boundaries down early, because the reason for them is psychological. Once you’ve spent six months in a transaction, walking away gets much harder. Fatigue makes bad terms look acceptable, and the sunk cost starts talking: “After everything we’ve invested, we can’t stop now.”

Yes, you can. Sometimes you should.

Yes. No. Deal.

Yes. Know. Deal. has a second reading: Yes. No. Deal. Both outcomes are real, and walking away is one of them. A no, reached calmly against a list you wrote months earlier, is a result.

Walking away when you need to is a different thing from fighting for every dollar. You need a good transaction, and so does the buyer. If one side feels deceived, humiliated, or trapped, the relationship after completion gets difficult, and that’s a real problem when part of your price is deferred, an earn-out is running, your managers are staying, or your warranties still apply. Protect what counts. Trade what costs you less than it’s worth to them. Know when a point is material, and when ego is trying to turn a small issue into a battle.

The aim is a deal whose economics and obligations you understand and are prepared to live with. If the deal in front of you isn’t that deal, you already know the other answer.

If you’re raising money rather than selling, the same discipline applies to a term sheet that drifts between the first meeting and the final documents. Check the last version against the first, line by line.

If you are the buyer here: every late change you win costs goodwill you’ll need after completion, especially if the seller is staying on or part of the price is deferred. Ask for what you need early, and keep the total visible to both sides.

What to do this week

Write your walk-away list now, before any buyer exists: the minimum cash you’d need on the day, the longest you’d stay on, how much of the price you’d let depend on targets, the liabilities you won’t take on, and the kind of buyer you won’t sell to.

Put it somewhere you’ll see it again, and give a copy to the person you trust most to tell you when you’re drifting. When a late change arrives, hold it up against the list and ask whether you’d have accepted it on day one.

That’s the whole timeline, from two years before a sale to the day the deal completes or doesn’t. Find it first, and yes, no, and deal all stay yours to choose.

The walk-away and the late stages of a deal are in Mastering the Art of Negotiation and Sales Processes, and why you keep running the business through the sale is in Financial and Legal Essentials for Selling Your Business. Those two, and the other five guides behind these 14 articles (Preparing Your Business For Sale Tips, Maximising Operational and Technological Efficiency, Amplifying Market Presence and Growth Potential, Cultivating a Thriving Organisational Culture, and Crafting Impactful Sales Presentations and Materials), are free to download from the Download Vault: manolutions.com/downloads.