What is Deal Breaker?
The Short Answer
Deal Breaker explained simply
A deal breaker is a specific condition or issue that, if not met or resolved, will cause a buyer to walk away from a business acquisition. It is a non-negotiable point that can stop a sale from happening, regardless of other positive aspects of the deal. Buyers often have a list of these conditions, and if any are triggered, the deal is off.
Real-World Example
The Unlicensed Business
Imagine a buyer is looking to acquire a plumbing business. During due diligence, they discover that the business owner does not have the required state plumbing license. For the buyer, this is a deal breaker because operating without a license is illegal and would require them to shut down the business to get licensed, losing revenue and customers.
Why this matters
Understanding potential deal breakers is crucial for sellers. Identifying and addressing these issues before listing your business can prevent wasted time and effort. For buyers, clearly defining your deal breakers helps you focus on suitable opportunities and avoid bad investments.
Be upfront about any potential deal breakers you know of. Hiding them only delays the inevitable and damages trust.
Be upfront about any potential deal breakers you know of. Hiding them only delays the inevitable and damages trust.
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