In short
Podcast Summary: The Business Acquisition Podcast with Bruce Whipple
Episode Title
347 - Case Study - 100% Seller Finance With Seller Paying $130K Broker Fee!
Overview In this episode, Bruce Whipple discusses a compelling case study that highlights the intricacies and strategies involved in a successful business acquisition. The case emphasizes the advantages of seller financing and the significance of thorough due diligence.
Key Points
- Seller Financing: The episode showcases a 100% seller finance deal, which is rare and advantageous for buyers.
- Motivated Seller: The seller's willingness to cover the broker's fee of $130,000 and the decision to offer seller financing indicate a motivated seller, which can lead to favorable terms for the buyer.
- Due Diligence: The importance of conducting comprehensive due diligence is emphasized, as it enables buyers to negotiate better terms based on findings.
Case Study Details
- Background:
- The mentee, a former member of Bruce's VIP Mastermind, had previously completed 12 acquisitions in the healthcare sector.
- The acquisition began with traditional bank financing, proposing a deal of 5.5 times EBITDA with a 60% closing and 40% rollover equity.
- Due Diligence Findings:
- A minor complaint was filed against the healthcare company’s principal, which initially posed a challenge for securing bank financing.
- The mentee capitalized on this finding to suggest seller financing as a more favorable alternative.
- Negotiation Process:
- The mentee met the seller, who was impressed with their approach compared to a competing private equity firm.
- Despite the competing offer, the seller preferred working with the mentee's group.
- After negotiations, the seller agreed to 100% seller financing and covering the broker's fee.
- Timeline:
- Middle of February: Letter of Intent (LOI) signed.
- May 2nd: Deal closed after negotiations and due diligence.
Insights and Takeaways
- Current Market Conditions:
- Bruce mentions that economic conditions are conducive to seller financing, as banks are becoming more conservative.
- There's an opportunity for buyers as private equity firms are less active than in previous years.
- Actionable Advice:
- Emphasizes the need for aspiring business owners to seek guidance and engage with knowledgeable individuals (like mentors or advisors).
- Encourages taking action quickly as economic opportunities may not last.
Conclusion Bruce Whipple wraps up the episode by urging listeners to implement the lessons learned from the case study and to act on their aspirations in business acquisition. The episode serves as both an educational resource and a motivational call to action for those interested in pursuing seller-financed deals.
For more insights and resources, visit [brucewhipple.com](http://brucewhipple.com).
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Transcript
Automatic transcript. May contain errors.0:00One of the things that I've said recently is I think it's a great time for seller finance. So what do you say we talk about a seller finance 100 % deal, which just recently happened? So this is a VIP former member. He learned well in the VIP mastermind, and he ended up in health care and did 12 acquisitions now. But the latest acquisition started off to be a deal that did have bank financing. It was a five and a half times EBITDA, 60 % at closing, and then 40 % rollover equity. And the healthcare professional was going to stay around for five years. But during the due diligence, there was a minor, it turned out to be very minor, but a minor complaint filed against the principal of this healthcare company.
1:02And it was really interesting. The mentee flew out to meet with him, the owner of this practice. And the owner said that he was very impressed with the mentee's group following the initial call. And despite having an offer from another group, probably a PE group, that went so far as to send a private jet to bring him back to their headquarters. He felt something was wrong about their approach. He's a straightforward, values-driven individual, and ultimately felt a strong, genuine connection to the mentees group. So as I said, he did have a minor complaint filed with the governing board, and the mentee was able to use that to his advantage to say, look, the bank is probably not going to look terribly favorable with that.
1:58So we're so close to getting this deal done. Why don't we do 100 % seller finance? So the owner talked to his wife, came back and said, yes, we've decided to do that. You can have the accounts receivable. I'll sign those over to you, which was fantastic. And then what was really interesting was there was a broker involved. And the broker's fee was $130 ,000. And initially, they went back. They tried to have the broker be paid over 24 months. The answer to that was no. Doesn't surprise me from a broker. But the principal was so impressed, he decided that he would pay that himself and was able to do that.
2:46So he got 100 % seller finance. He got all the accounts receivable, and he got the seller to pay for the broker's fee. So that, if you haven't figured it out already, is the definition of a motivated seller. Also, a great example of how if you listen and if you do your due diligence correctly, you will find things that will help you in negotiating the deal. and that process turned this from a bank deal to a 100 % seller finance deal. And this deal was closed on May 2nd. Would not have happened that quickly with a bank. But think about that. The original LOI was signed February, middle February.
3:38There were negotiations back and forth. There was due diligence work. There was the issue of the minor complaint. point. Then the mentee went out to sit with him and negotiated the deal and signed the deal during that meeting. Yes, there were lawyers involved from the other side, which is typical, raised some issues, but those were resolved, and the deal was done. So LOI signed middle of February 2025. The situation changed to 100 % seller finance, so there was a renegotiation, and then it was closed in the very early part of May. Pretty impressive. Lots of lessons in that, but as I've said before, this time with the economic concerns, with banks being somewhat but more conservative with changes in the SBA regulations.
4:32It's a great time to utilize seller finance. PE firms are not as busy as they have been three years ago, say. The impact of that is certainly on law firms and accounting firms wanting to find more business. So there's a lot of things that are pushing in the right direction. So I hope that you take that case study. Take it to heart. Make sure you understand these steps. Make sure you have people around you that can help you. Usually that's the board. Sometimes that's me if you're in the VIP Mastermind. But be that as it may, make sure that you're taking action because this window of opportunity will not last forever.
5:14It was similar during the pandemic, and this will in time change as well. All economic cycles are just that cycle. So I hope that helps. If you're interested in what I do, brucewhipple.com is a place to go over and find that out. But take these lessons to heart and more importantly, put them into action for your own benefit.
From the publisher
Case studies can teach a lot of business acquisition lessons, and this one has a lot of lessons.
- 100% seller finance
- Accounts receivable are left for the buyer
- Broker's fee paid by the seller.
That is the sign of a motivated seller. And when a deal is this good you better do your due diligence thoroughly and this mentee did.
It is also a good lesson in due diligence and how to use what you find.
In this week's podcast, I walk you through the timetable and specifics of how this former VIP Mastermind member and now business partner with me did this deal..
To Your Success,
Bruce Whipple
brucewhipple.com
