As a buyer who has failed to buy a business on more than one occasion, I am fully qualified to answer this. Many words come to mind for things that are lacking. Time,
experience, background, and the list goes on. Indeed most first time buyers will probably fail, which is good news. Buying a business is very much like other business ventures: it requires some failure in order to succeed. If you bought a business on the first try, you will not have learned much, and in fact you may do more harm than good. In the process of failing to buy a business you accumulate a wealth of knowledge, including, financial, negotiating, valuation and even picking up specific industry experience which always comes in handy. I still go into injection molding shops armed with experience I acquired fifteen years ago when I failed to buy a several of them. When you fail to buy a company it means you at least tried. In trying to buy that company you went out to see the shop, you spoke with the owner, you looked at the financials, you put together a proposal, you negotiated and may have even tried to raise money. All of which put you way ahead of the competition in buying businesses. It is great experience even if you ended up getting a job afterwards. However beneficial the experience of failing to buy the business is, you still failed, right? So why do we fail? Trick answer: To gain experience. Not the answer you were expecting? You didnt really want to know why we went through all the trouble of failing, you wanted to know why the buyout didnt happen. There is an answer to this too. Of course there are many reasons. 1) You underestimated the time involved 2) You tried to buy a deal above your means 3) The deal was undoable 4) You were afraid to jump in 5) The Seller was afraid to get out. These are some of my favorite reasons for failing. And the all time best reason for failing to buy a business? Another trick Answer: You havent failed enough yet. This simply means you are in a numbers game and you need to pour through 100 deals or so before you get to the one that gets done. Meanwhile you pick up all the required experience in buying a company. Does this take a serious amount of time and commitment? You bet it does. It could take 6-12 months to buy a business or longer. Easily. The buyout process is not for those short of time because their day job is all they can handle. When undertaking an LBO, you must have a secondary source of income or assets to live on. You cannot do an effective job of buying a company while you are worried about feeding your family. Keep the job, do it on weekends or wait until the time is right but do not ever, ever assume you will complete an LBO on your own timetable. This goes for even smaller
companies underneath the LBO radar as well.