Capittal's view: mistakes that reduce the price when selling a company

Quick answer

Capittal's view is that the mistakes that most reduce the price when selling a company are going to market unprepared, failing to normalise EBITDA, approaching buyers badly, hiding risks, negotiating with a single interested party and losing control of net debt, cash and working capital. Almost none of them is made at signing. They are made months earlier, while the owner still believes that selling is a conversation rather than a process.

Which mistakes do I make before going to market, and what do they cost?

Price is lost before the first meeting. A buyer does not pay what the business earns: they pay what the business can be shown to earn.

• Not normalising EBITDA. The reported profit of a Spanish family-owned company usually contains owner salaries above or below market, rent paid to a family property company (in Spain, a sociedad patrimonial), cars, personal expenses and one-off income. Adjusting for all of that is legitimate. But every adjustment has to be documented with an invoice, a contract or a payslip before it is shown to anyone.
• Presenting adjustments with no support. An adjustment the buyer cannot verify does not raise the price, it lowers it. The buyer's accountants strike it out in due diligence and the multiple applied to that EBITDA goes with it.
• Financial information that does not survive a review. Monthly management accounts that do not reconcile to the statutory accounts, uncounted stock, old trade receivables nobody will collect, provisions that were never made. Every inconsistency turns into a discount.
• No valuation of your own. Without a defensible range, the owner negotiates against the number the buyer puts on the table. The expectation is then set by the other side.

What it costs: an EBITDA adjustment that falls away drags the whole multiple with it. How it is avoided: the information and the evidence behind the adjustments are prepared before going to market, not when the request arrives.

Why do customer concentration and my own indispensability lower the price?

These are the two risks a buyer always discounts, and they are almost never explained properly.

Customer concentration is not a problem in itself. The problem is failing to explain it. If one customer carries a large share of revenue, the buyer assumes the worst: a short contract, a personal relationship with the owner, a price with no defence. The way to hold the price is to document how long the relationship has run, the contract in force, the renewal history and why that customer will not leave.

Dependence on the owner costs even more. If the commercial relationships, the pricing judgement and the dealings with the banks sit only in your head, the buyer is buying a risk. They translate it into two things: more deferred consideration and more months of stay-on. Reducing that dependence before selling — handing customers over, documenting processes, giving authority to the second tier — is one of the few price levers entirely in the seller's hands.

What goes wrong during the sale process itself?

Many owners start a sale because they receive a phone call. That call can be an opportunity, but it is also a trap if the seller grants exclusivity without knowing value, alternatives, timetable or risks.

• Negotiating with a single buyer. With no real alternatives there is no competitive tension. The buyer knows it and uses it. An organised process with several qualified candidates lets you compare offers; an isolated conversation leaves control on the other side of the table.
• Granting exclusivity too early. Exclusivity belongs in the LOI, once price, structure and conditions are already framed, and with a fixed deadline. Granting it earlier hands over the process: the buyer can let the timetable slip and renegotiate at no cost, because they are no longer competing with anyone.
• Letting the deal leak. Employees, customers and suppliers react badly to incomplete information. An early leak causes staff departures, commercial doubts and, if the process collapses, a business that carries a stigma. Confidentiality is managed with NDAs, a blind teaser and a phased communication plan.
• Not preparing due diligence before it arrives. Answering late or improvising destroys trust. Every week of delay is time for the buyer to find reasons to cut the price.

The price nearly always falls in due diligence for the same reason: risks, adjustments, debt or contingencies surface that were not properly explained at the outset.

Why is looking only at the headline price the most expensive mistake?

This is the silent one. The owner focuses on the multiple and forgets the structure. Two offers with the same headline price can be worth very different amounts.

• Net debt and cash. What you receive is the price of the shares, not the value of the business. The definition of net financial debt decides how much is deducted.
• Working capital. If the normalised working capital target is set badly, the completion adjustment can cost you part of the price months after signing.
• How much you actually receive at closing. Deferred consideration, earn-out, escrow retentions and rolled-over equity are not money received: they are money conditioned.
• Warranties and escrow. The amount retained, the term and who controls it change the net outcome of the deal.

How it is avoided: compare offers on certain cash at closing, not on the headline. A lower offer paid in full at closing can be worth more than a higher one with half of it conditional.

What do I have to negotiate on the earn-out, the warranties and my stay-on?

These three points get left to the end, and that is where money is lost, because by then there is no leverage.

• An earn-out with no levers. Accepting deferred consideration without controlling the decisions that determine it means accepting a hope, not a price. Fix the perimeter that is measured, the accounting policies frozen at closing, the decisions you can take without approval and monthly access to the accounts.
• An earn-out with no acceleration clause. If the buyer removes you without cause, the earn-out must be paid in full or settled under a formula agreed in advance. Without that clause, your deferred price depends on not being dismissed.
• Warranties and indemnities left open. Accepting broad representations, long survival periods and high liability caps moves a risk onto the seller that materialises after closing. Negotiate caps, de minimis and basket thresholds, separate time limits by subject matter and, where it fits, warranty and indemnity insurance.
• Stay-on and non-compete left to the end. How many months you stay, with what duties, on what pay separated from the price, and with what activity and territory limits in the non-compete. All of it goes on the table from the first offer.

When is it a bad moment to start a sale?

Timing is a pricing mistake, not a diary detail.

Starting tired is the worst possible moment. A sale process consumes management time for months, with due diligence, meetings and contract negotiation on top of running the business. An owner who arrives exhausted concedes sooner, concedes more and closes worse.

Starting in a hurry has the same effect. A visible urgency — cash, health, a shareholder dispute — is a negotiating lever for the buyer.

And going to market straight after a bad year means selling while explaining a fall rather than a trend. If the weak year was a one-off and has already been corrected, it usually pays to wait for a financial year that supports the story rather than to document excuses.

How do I protect the business while I am selling it?

The business has to keep performing while the deal advances. If the owner is distracted and results deteriorate during the negotiation, the buyer renegotiates, and has grounds to.

The way to prevent it is to split the work: a minimal internal team with access to the information, an external adviser running the process and the data room, and a timetable that organises the buyer's requests instead of answering them on demand. The owner should keep running the company; somebody else runs the process.

What is the next step if I want to sell without losing price?

Treat the sale as a process, not a conversation. Preparation first, then materials, then buyers, then comparable offers and finally contract negotiation. Before you speak to anyone, put five things in order: normalised EBITDA with documentary support, a defensible valuation range, a written explanation of your customer concentration, a plan to reduce your own indispensability and a broad buyer map. Capittal's view is that selling a company does not reward improvisation: the most expensive mistakes are made before anything is signed.

At Capittal Transacciones we go through these mistakes one by one as part of the confidential valuation we prepare for owners considering a sale. We are a mid-market M&A boutique handling transactions in the approximate range of 3 to 250 million euros, with eight offices in Spain (Barcelona as head office, Madrid, Girona, Lleida, Tarragona, Palma, Zaragoza and Valencia) and we are part of the NRRO group. The partner handles every mandate personally, including the conversation about what is costing your business price today.

Keep reading

• Guide: every decision you face when selling your company
• Owner perks and EBITDA adjustments
• When to sell and when to wait

Fix what cuts the price before going to market: talk to Capittal