Every M&A transaction has two sides: the seller, often closing one of the most important chapters of their life, and the buyer, investing capital and taking on risk to build the next stage of growth.
Both want a successful deal. But they often prioritize different things — and unless those priorities align, even the most promising transaction can fall apart.
For small and medium sized enterprises (SMEs), where trust, transparency, and resilience matter just as much as numbers, understanding both sides is the key to making deals work.
The Seller’s Side
For SME owners, selling is rarely just a financial event. It’s about legacy, continuity, and capturing the value of years of work. Sellers typically want:
- Fair value that reflects not only past performance but also future potential.
- Continuity for employees, clients, and company culture.
- A clean exit with payment certainty and minimal disruption.
Common deal breakers for sellers include:
- Aggressive last minute price reductions (“chip downs”).
- Payment terms weighted too heavily toward earn outs or deferred structures.
- Unclear intentions from the buyer about the future of the business.
The Buyer’s Side
Buyers — whether private investors or strategic acquirers — approach deals with a focus on return and risk. They want to know they are buying not just today’s earnings but tomorrow’s stability. Their priorities often include:
- Clean, reliable financials and realistic forecasts.
- Recurring revenues that provide predictability.
- Limited client concentration, so the business doesn’t hinge on a handful of customers.
- Processes and systems that prove the business can operate without constant owner involvement.
- Key people retention, ensuring knowledge and client relationships stay intact.
Deal breakers for buyers often include:
- Hidden liabilities or poor documentation in areas like tax, HR, or contracts.
- Overly optimistic valuations disconnected from performance.
- Sellers who resist transparency during due diligence.
Complex Deal Structures: Bridge or Barrier?
Even when buyers and sellers agree on price, they may not agree on how that price is paid. Deal structures are often what make or break SME transactions.
- Cash at closing gives sellers certainty but can strain buyers.
- Earnouts link payment to future performance, aligning incentives but creating tension if targets aren’t realistic.
- Seller financing or minority rollovers can bridge valuation gaps but require trust and ongoing collaboration.
The structure must balance risk and reward on both sides. When it doesn’t, negotiations stall.
Where Deals Are Made
The best SME deals succeed because both parties bridge gaps through:
- Preparation: Sellers who professionalize financial reporting, clean up legal issues, and document processes build trust and attract stronger offers.
- Flexibility: Buyers who adapt structures creatively, blending upfront cash with performance-based components, help transactions move forward.
- Communication: Open, consistent dialogue prevents surprises and keeps both parties aligned, even during tough negotiations.
Where Deals Break
Transactions often collapse due to:
- Misaligned expectations: sellers expecting “strategic premium” buyers don’t see.
- Surprises in due diligence: undisclosed debts, compliance risks, or client dependency.
- Cultural clashes — SMEs with founder led identities struggling to integrate into larger organizations, or buyers disregarding the seller’s legacy.
Advisory34 Perspective
At Advisory34, we’ve seen that successful SME transactions happen when each side understands the other’s priorities. Sellers gain when they prepare their company as if they were investing in it themselves. Buyers succeed when they approach SMEs not only as assets but as communities of people, clients, and processes.
When those perspectives align, deals don’t just close, they create value that lasts.
Takeaway
Whether you’re preparing to sell your SME or looking to acquire one, the key is balance: between structure and certainty, between valuation and risk, and between legacy and growth.
At Advisory34, we help SMEs navigate these dynamics so that deals work for both sides. If you’d like to explore SME opportunities, let’s connect.
