Accountants can prevent deals going awry....but don't
24th Dec 2020
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The deal was on the face of it straightforward and the accountant looked forward to presenting a nice fee note to her client for ongoing support during the deal, not to mention a handsome referral commission.
Everything checked out during due diligence. The price was right.....
...until it wasn't!
The vendor got greedy and reckoned, in our opinion, that since it had been plain sailing he could "up" the agreed price at the last moment, from £1.1M to £1.5m - which was more than he had originally wanted, which was £1.4M until we negotiated it down, which is part of our remit when working for a buyer. The seller was not using a broker because he reckoned he could perform better and save money.
We advised the client to stand firm and not budge a penny above £1.1M - to do so would mean nothing but trouble down the line such as further increases and it also raised questions over the seller's integrity which may impact the handover and agreed 18 month consultancy post-sale.
The accountant was not a trained negotiator and failed to recognise this and overruled our advice not to budge.
So what happened?
The buyer agreed went up to £1.4M and the seller latched onto this weakness and stretched out talks for a further 2 weeks with the sudden appearance of an "offer" of £1.5M . The seller refused to prove there was a genuine offer and in any event was locked in by the heads of terms. Our buyer ended up paying £1.75M , which is a staggering 59% premium over what was agreed.
The accountant managed to persude her client that solicitors always raise objections and don't take a commercial view, instead of actually advising the client that the job of the solicitor is to protect their client, who in this case ignored the warnings from the solicitor.
One very pleased accountant but a very annoyed broker, and a client who was too busy trying to keep the slippery seller in line post sale, to even think about making a formal complaint against the accountant, let alone sue the the seller, once they "woke up and smelled the coffee" 3 months later.
A classic case of getting so drawn in and involved that one cannot see what is happening - which is why professional advisers exist!