Why Smart Business Owners Get Outsmarted in M&A Transactions
There's an old saying in poker: if you can't spot the sucker at the table, it's probably you. This adage rings equally true in mergers and acquisitions, where the stakes can be millions of dollars. But unlike poker, where you eventually know you’re the sucker because all your money is gone, the M&A game is much more subtle, and you may never realize you were the sucker.
After decades of executing M&A transactions, we have witnessed countless business owners approach the sale of their company with a dangerous mix of overconfidence and naiveté. They often believe that because they've built a successful business, they can navigate its sale just as effectively. This misconception can cost them millions, because they don’t know what they don’t know.
Consider this: when you sit down at the negotiating table with a sophisticated buyer – typically a private equity firm or strategic acquirer – you're facing an opponent who negotiates deals for a living. They have executed dozens, if not hundreds, of transactions. Their team includes seasoned M&A attorneys, tax specialists, financial analysts, and operational experts. They know every trick in the book, every leverage point they can exploit, and they know how to take advantage of an unsuspecting seller in a way that leaves the seller feeling like they got a great deal and are best of friends.
And you? You're likely selling a business for the first and only time in your life.
The asymmetry in this situation is stark. While you see a fair offer based on EBITDA multiples and headline numbers, they see:
Working capital adjustments that can claw back millions post-closing
Representation and warranty details that could leave you exposed to significant liabilities
Earnout structures that might look attractive but are statistically unlikely to pay out
Tax implications that could transform a good deal into a mediocre one
Employment agreements and non-competes that could restrict your future opportunities
We have had a front row seat to the tactics smart buyers try to get away with on the dozens of business sales we have worked on. If they are trying to pull the wool over our eyes, knowing how experienced we are, just imagine what they do when they are the single buyer at the table negotiating with a business owner who is selling a company on their own for the first time.
The Single Buyer Trap in M&A Deals
One of the most costly mistakes we regularly witness is business owners pursuing a deal with a single buyer. The logic seems sound on the surface: "They approached us with a great offer," or "We already have a relationship with them." But here's the brutal truth: if you're negotiating with just one buyer, you're automatically the sucker at the table.
Why? Because without a competitive process, you have no leverage and no real way to determine your company's true market value. We have seen differences of over 100% in purchase price when companies run a proper sale process versus negotiating with a single buyer. Remember, that seemingly attractive offer from your first suitor is likely their opening bid in a market they hope remains uncontested. Just think what they might have offered if they thought their biggest competitor was also vying for the acquisition.
We have witnessed a great consistency in the sale processes we have run. When we create a competitive market for the company we are selling, we will receive a couple “low-ball” offers, a larger grouping of buyers that offer what we would consider to be around the “fair value” for the company, and a couple “outlier” offers on the high side that are offering more than theoretical fair value. When you are negotiating with a single buyer, there is no reason for them to offer anything more than fair value, and they might just try to convince you that their low-ball offer is the fair value for your company. Running a competitive sale process with multiple potential buyers is the only way to ensure you receive maximum value when selling your company.
The Attorney-Only Misstep
Another common pitfall is relying solely on legal counsel. Don't misunderstand – having a skilled M&A attorney is crucial. But thinking they can replace what an M&A advisor brings to the sale can be a costly error. We have seen many business owners hire only an attorney to help them with their sale, believing this provides sufficient protection in a deal.
The reality is that attorneys, while essential for protecting your legal interests, typically don't:
Develop comprehensive marketing materials that position your company's value proposition
Maximize sale price by running a professional competitive auction process
Build and maintain relationships with hundreds of potential buyers
Structure and negotiate the major financial aspects of the transaction
Negotiate findings in quality of earnings reports
Negotiate the working capital provisions of the agreement and calculate the final number
Navigate challenging due diligence processes
Manage the intense day-to-day requirements of running a transaction
An attorney's role is to protect you legally once a deal structure is proposed. But who's determining if that structure maximizes your value? Who's ensuring you're seeing all potential buyers? Who's managing the complex interplay between price, terms, and conditions?
The reality is that professional buyers are not your friends, regardless of how collegial the discussions might seem. Their job is to acquire your business at the lowest possible price with terms most favorable to them. They have fiduciary obligations to their shareholders or limited partners, not to you.
This is why successful transactions require a team of seasoned advisors:
An M&A advisor who understands market dynamics, can create competitive tension, and knows how to position your company effectively
Transaction attorneys who can protect your interests in complex legal documents
Tax advisors who can structure the deal to maximize after-tax proceeds
Wealth managers who can help you plan for life after the sale
The cost of these advisors is typically a fraction of the value they create and protect. More importantly, they level the playing field. They know the playbook because they've seen it hundreds of times before.
Remember: professional buyers aren't just evaluating your business – they're evaluating you. When they see an unrepresented seller, they see opportunity. They know that no matter how successful you've been in building your business, you're stepping into their arena, playing their game, by their rules.
So, who is the sucker at the table in M&A transactions? It's the business owner who believes they can go it alone, who thinks they can match wits with professional buyers and their army of advisors, who doesn't understand that the true cost of inexperience in M&A isn't just monetary – it's also never knowing what you could have gained.
When you're about to embark on the most important financial transaction of your life, ask yourself: can you really afford to be the least experienced person at the table? And more importantly, can you afford to let a single buyer define your company's value without testing the market?
About Waypoint Private Capital
Waypoint Private Capital is an investment banking firm that advises the owners and management teams of middle-market companies through critical stages of their business' life cycle. Waypoint helps business owners sell companies, buy companies, raise equity and debt capital for growth and recapitalization, and plan for a successful exit from their business.
To learn more visit waypointprivatecapital.com or call us at 608.515.3354 or 918.633.2647 and speak with a Waypoint Private Capital expert.
© 2025 Waypoint Private Capital, Inc. All Rights Reserved.
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