The owners had already tried to sell. They wanted $130 million. The best offer they got was $90 million. They fired their investment banker and stopped the process.
Then they called me.
I toured the facility, sat with the management team, and told them on day one that I thought we could sell the business for $230 million. They thought I was out of my mind. They had been running this company (a food processing and manufacturing operation, 110 employees, over 20 years in business) and no one had ever come close to that number.
But they were serious. So they said, "What the hell. Let's do it."
Twelve months later, we closed at $240 million. No earnout. No retrade. Forty-five days from LOI to close.
I work with businesses doing $5 million to $30 million in EBITDA. If you are a business owner in that range and you have been told what your company is worth, I would encourage you to read what follows carefully, because the number you were given is almost certainly wrong, and the reasons are structural.
The Three Things That Were Suppressing the Value
When I walked in on day one, the picture came together quickly. After 30 years of doing this, 15 of them on the buy side at Bosch overseeing 50 to 60 acquisitions a year, you develop an intuition for where a business can go. And more importantly, you can see exactly what is holding it back.
First: they had the wrong buyer. Their previous process was essentially a single-buyer process. They went to market, got one serious offer, and that offer was $90 million. When you run a process with one buyer, that buyer knows they have no competition. The price reflects that.
Second: there was severe owner dependency in sales. One of the owners was running the entire sales function personally. He had built the business over two decades, and the relationships he had were with smaller buyers, the kind of customers he was comfortable with, the kind he had always known. Nobody was behind him. Nobody could replace him. And from a buyer's perspective, that is a flashing red light. If the owner walks out the door, does the revenue walk with him?
Third: the numbers were flat. The business had been performing steadily, which is actually a credit to the owners, but there was no visible growth trajectory. When a buyer looks at a flat business and you hand them a hockey-stick business plan, they don't believe it. They price in the risk. And the way they price in risk is with deal structures that quietly transfer value away from the seller. I will come back to this, because it is the single most important thing most business owners do not understand about selling their company.
The First Six Months: Building a Business Worth Buying
Related: The Anatomy of a Business Sale: Every Stage Explained in Detail
A traditional investment banker will sit down with the owners, prepare an overview of the business, and get them ready for buyer conversations. Then they stop. That is the process. Take the business as it is, package it, and run a transaction.
That is not what I do.
The first thing we did was hire a new head of sales. The previous owner had grown up with the business. His network was built around smaller buyers, companies he had known for years. We brought in someone who had spent his career selling to multi-billion dollar enterprises. Within one month of him starting, he landed a contract larger than any single account the company had ever had. And he brought a pipeline of similar accounts with him, because he knew how to navigate the quality standards, the EDI requirements, the delivery expectations that large customers demand.
That single hire changed the growth story of the business.
The second thing we did was fix the operations. When I walked through the facility, I could see they had significant available capacity they were not using. The warehouse layout was creating inefficiency in the production flow. And there was one piece of equipment, the bottleneck in the process, that was not being run anywhere near its full capacity.
So we relocated the warehouse to simplify the flow. We precisely measured available capacity at every station. We ran the bottleneck equipment as hard as we could. And then we built dashboards across the entire value chain so the sales team could see available capacity in real time and sell to it, the manufacturing team could see what was being sold and plan accordingly, and the purchasing team could buy opportunistically when input prices were favorable.
The result: within six months, without changing a single sales price or input cost, we dropped an additional 5% of revenue straight to the bottom line. EBITDA went from $12 million to a run rate of $25 million in six months.
That is what I mean when I say: do not sell when the owner is ready. Sell when the business is ready.
The Second Six Months: Building a Story a Buyer Can Believe
After six months of operational work, we had real results. But results alone are not enough. You need a credible path forward, and that path has to be grounded in evidence, not aspiration.
We built a detailed three-year business plan. Not a hockey stick. A plan with clear milestones, defined action items, and visible progress that a buyer could verify. One of the large customers we were targeting was already in the qualification process, auditing the facility, running test batches, moving through their quality standards. That is not a projection. That is a customer who is two months away from signing.
We also identified two or three smaller companies in adjacent product lines, each around $5 to $10 million in revenue, and began acquisition negotiations. This gave buyers a clear inorganic growth path on top of the organic story.
And we commissioned a quality of earnings. An independent audit of the financials. They did find one issue: the inventory valuation was not quite right. We fixed it. And then we had a clean, audited set of financials we could hand to any buyer with full confidence.
Finding the Right Buyer and Understanding What the Business Is Worth to Them
Related: Business Exit Planning: The 3-Year Framework for Maximizing Your Sale Price
Here is something most investment bankers do not think about carefully enough: strategics can pay more than private equity. But only if you understand what the business is worth to them specifically, not just what it is worth in the abstract.
In this case, the strategic buyer was a European company. They had operations in the US but did not have this product line. They already had relationships with many of the large customers we had just started selling to. For them, this acquisition was not just a business. It was an immediate plug-in to their existing customer base and logistics infrastructure. They could increase revenue and decrease costs simultaneously.
I knew that before I approached them. I built an internal valuation of what the business would be worth to them, and I presented it to them that way. That is how we got to a first bid of $220 million from the strategic, well ahead of every other offer on the table.
Once the strategic was at $220 million, I went back to the private equity firms and told them they needed to sharpen their pencils. They were not in the ballpark. After a month of that process, the final bid from a PE firm came in at $240 million.
What 30 Years on the Buy Side Taught Me About Selling
I need to explain something about my background, because it is the reason I approach these deals differently from every investment banker you will meet.
I spent 15 years at Bosch, the German conglomerate with $90 billion in revenue. I was Head of Strategy and Mergers and Acquisitions for North and South America, reporting directly to the board. We were buying 50 to 60 companies a year. Bosch operates at a nearly six sigma quality level, one defect per million parts in the field. When you acquire a company doing $100 million in revenue, they are typically at a three to four sigma level. That is a 40% defect rate. You cannot simply plug that company into a Bosch operation. You have to rebuild it.
So for 15 years, that is what I did. I walked into businesses, identified the three or four operational levers that mattered, and changed the trajectory within six months. Margins typically went from 10% to 20% net income. Revenue growth accelerated to 20% annually. Not by implementing a full system, but by focusing on the things that actually move the needle, starting with the management team, because the capabilities of the management team are what ultimately drive the capability of the business.
When I moved to the sell side, I brought all of that with me. I know how a strategic buyer evaluates an acquisition. I know what they are willing to pay a premium for and what makes them walk away. I know how a PE firm structures an LOI to create room for a retrade. I know which clauses in a purchase agreement are designed to transfer value from the seller to the buyer after close.
Most investment bankers grew up in investment banks. They learned a process. They follow it. They have never sat in a boardroom deciding whether to pay $200 million or $240 million for a business, and they have never had to justify that number to a board of directors. I have. Hundreds of times.
That is the difference.
The 70% Trap: Why Most Sellers Never See the Money They Were Promised
Related: The Business Sale Timeline: What to Expect at Each Stage
This is the section I want every business owner to read twice.
In my experience, approximately 70% of deals get retraded between the letter of intent and the final close. The seller signs an LOI at one number and closes at a materially lower one. The mechanisms are predictable.
The EBITDA dispute. The buyer's diligence team "discovers" that your stated EBITDA is overstated. They reclassify expenses, challenge add-backs, and arrive at a lower number. If your financials were not independently audited before the process started, you have no defense.
The working capital adjustment. If the LOI does not precisely define what constitutes working capital, down to the specific general ledger accounts, the buyer will redefine it at closing to reduce the purchase price. I have seen this happen on nearly every deal where the definitions were left vague.
The earnout. This is the most dangerous structure for a seller. When a buyer is not confident in your projections, they shift a portion of the purchase price into an earnout, money you receive only if the business hits certain targets after the sale. The problem: 70% of earnout clauses never pay out a single dollar. The buyer adds expenses to the business post-close, which depresses the metrics the earnout is tied to. If the earnout is based on EBITDA, which it usually is, the buyer controls the inputs. You do not.
The seller's note. If the business underperforms after the sale, your note is at risk. You have become an unsecured creditor of a company you no longer control.
The way to prevent all of this is to define everything precisely in the LOI itself, before due diligence begins.
When I structure an LOI, I do not write "EBITDA" or "inventory." I go down to the general ledger and list the specific accounts that comprise each number. If inventory is defined as 16 specific accounts, then at the closing date, you add those 16 accounts up and that is the number. There is no interpretation. There is no room for a buyer to say the inventory is worth less than stated. It is mathematical.
The quality of earnings we commissioned serves the same purpose. When a buyer's team comes in for due diligence and finds clean, audited financials with no surprises, there is nothing to retrade. The due diligence on this deal closed in 45 days. The industry standard is 90 to 120 days. We were done in half the time because everything was prepared, everything was clean, and there was nothing to argue about.
If you are going into a process and your advisor has not discussed quality of earnings, working capital definitions at the GL level, and earnout avoidance strategy, that is a red flag. Not about the deal. About your advisor.
Why I Do This Differently Now
I have spent my career on both sides of the table. I have bought over 100 companies. I have seen what happens when sellers go to market unprepared. They get a lower price, they get retraded, they get trapped in earnouts that never pay, and they walk away from 20 years of work with less than they deserved.
That is why I do what I do now at Deal Flow Advisory.
Our services to sellers cost nothing. The buyer pays our fee. There is no retainer, no engagement fee, no percentage of the deal value coming out of the seller's pocket. I work with the business before it goes to market, identifying the three or four levers that will change the trajectory, helping execute on them, and then running a process designed to bring the right buyer to the table at the right price with an LOI that cannot be retraded.
I do not follow the traditional playbook. I do not take the business as it is and hope for the best. I do not bring 50 unqualified buyers to the table and waste six months of the owner's time. I bring well-capitalized PE firms and family offices who have the money, know the industry, and will actually close, and I bring strategics who will pay a premium because I understand exactly what the business is worth to them.
The owners of that food processing company spent 20 years building something real. They were told it was worth $90 million. It was worth $240 million. The difference was not luck. It was preparation, positioning, and knowing how the other side of the table thinks.
If This Sounds Like Your Situation
Related: More foundational articles
If you are a business owner doing $5 million to $30 million in EBITDA and you have been thinking about a sale in the next 12 to 24 months, or if you have already been through a process that did not get you the number you wanted, I would like 20 minutes of your time.
Not to pitch you. To tell you what I actually think your business is worth, what is suppressing the value, and what it would take to close the gap. No cost. No obligation. Just a conversation between someone who has been on both sides of the table and someone who deserves to know what their options actually are.
Start the conversation at getdealflow.ai
Watch the Full Breakdown
If you prefer to hear this directly, I sat down for a full interview walking through every stage of this deal — the operational work, the buyer process, the LOI structure, and the earnout traps we avoided.
Watch on YouTube: Full Deal Breakdown with Devesh Sharma
Related Resources
- The Anatomy of a Business Sale: Every Stage Explained in Detail — Related article in foundational
- Business Exit Planning: The 3-Year Framework for Maximizing Your Sale Price — Related article in foundational
- The Business Sale Timeline: What to Expect at Each Stage — Related article in process-guide
- More foundational articles — Browse similar content
- Business Valuation Calculator — Calculate your business value
