Change management

Avoid roadblocks during investor transactions

Once you’ve decided to sell your business or take on an investor, you may find yourself in unfamiliar territory. The transaction process can be complex, and with so many moving parts, there are often delays and times when it feels as if the transaction may not reach the finish line.

Below is a list to help business owners understand potential roadblocks and how to avoid them.

Nonalignment between ownership and management

Everyone with an existing ownership stake in the business should be on the same page before entering a transaction process. Otherwise, a deal could be dead on arrival. This requires frank discussion to determine the outcomes each owner is looking for and how to prioritize these, as well as setting some boundaries as to terms the owners as a group will or will not accept. Similarly, you should ensure that anyone else that will be included in the transaction – key management figures that will co-invest, for example – are aligned on the future plans for the company.

Unrealistic expectations

Going into a sale process, owners should have realistic expectations of valuation, timeline to closing, and how the process works. Do your research before starting the transaction to understand the market for your company. If it’s not in line with your expectations, another path may make more sense. The transaction timeline will vary depending on the business, but generally you can expect that the entire process will take several months, even once you’ve entered into an official agreement with a buyer. Owners should also recognize early on that the time commitment required of them as the seller is significant, even with a team of advisors. Understanding these basics about the timeline will help you avoid feeling overwhelmed or burned out.

Inexperienced advisor team

When choosing advisors to assist with the transaction, many owners naturally look to people they’ve worked with in the past, such as a family or corporate attorney or the CPA who files their taxes every year. In some cases, these advisors may not be familiar with M&A transactions. Having someone on your transaction team – a specialized M&A attorney, a CPA familiar with sale transactions, or an investment banker – who has experience in the transaction process is vital to avoiding unnecessary negotiations or delays. An experienced advisor will have a better grasp on what deal terms are standard, or “market,” throughout the process and which are material to you as the seller.

Data and due diligence

A transaction process involves a lot of data, and both the content and the timing of that data can become significant roadblocks. Common data requests include financial statements, revenue by customer, employee roster, and tax returns, among others. The content also tells the story of your business and the information you’re providing to buyers. Once buyers dig into the business, if they find that the real story or numbers are different or changed, it can lead to renegotiation of terms or other delays.

The availability of data will also have a significant impact on the speed of the process. After a letter of intent is agreed upon, the closing date is highly contingent upon how quickly you can provide data to the buyer. To avoid delays, collect and organize your data beAfore starting the process.

Legal documentations

As the deal progresses, legal documentation starts to take center stage. Documents such as the LOI, purchase agreement, and employment agreements will be sent to your team for comments or edits prior to anyone signing. If, once the documents are received, your attorney takes several weeks to turn those comments back over to the buyer’s team, this can push out the timeline of closing, especially if there are multiple rounds of negotiations or changes. You should take the time needed to work through the document, understand all the points, and negotiate any changes, but make sure your team is prioritizing these documents, as days can quickly turn into weeks.


As discussed above, the agreement between buyer and seller is based upon the company’s performance at the time the transaction began. If EBITDA trends down significantly during the transaction, a deal could pause. Losing a significant customer or key employees during diligence run a similar risk if they have an immediate or projected impact on performance. The quality of earnings review that a buyer may run via an outside firm could also play into this if they find that the EBITDA provided is not sufficiently substantiated, for example. To help avoid this, a balancing act is required of the owner during the transaction process: you must balance pushing the business forward and execution of your projected performance with the time and mindshare needed for the transaction itself.

Final details

Once major documents are finalized and diligence winds down, most of the potential roadblocks are in the rearview. At this point, you’re likely past the deal-breakers but may still have some details arise that could delay closing. These can include landlord consent if you lease real estate for the business, liens on the business that lenders were unaware of earlier, or regulatory filings or approvals for certain types of companies. By anticipating any nuances like this in your business early on, you can prepare before the final stages of a deal.

Bottom line, selling your company or taking on an investor is a complex, time-consuming transaction for owners. Understanding the process and potential roadblocks before even turning down the road can help you prepare and ensures a smoother transaction for all parties.

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