Third Time's the Charm?

Background

Michigan CFO Associates was engaged early last year to help a founder-led business, referred to here as Company Y, address longstanding chart-of-accounts and reporting issues. Before that work could begin, the company entered its first attempt to sell the business, with draft letters of intent already in hand.

Rather than risk changing the numbers a buyer had already seen, the accounting cleanup was put on hold. In hindsight, addressing those issues before going to market would have smoothed part of what followed — a lesson that shaped every attempt after it.

Attempt One

The sale was managed by an investment bank, with Michigan CFO Associates supporting the process on the finance side. Momentum built through the summer, with a mid-September closing date targeted. A thorough financial update in early September pointed toward an on-time close, but the prospective buyer — a private equity firm — asked for more time.

The revised target became mid-November. A strong October kept things on track, but the buyer again asked for another month, pushing the date to December. When the same buyer requested still more time in December, Michigan CFO Associates raised the concern directly with the owners.

The deal's structure meant the owners would stay on and retain some ownership, but would carry the downside risk if the business underperformed. Weighing that risk, the owners asked what to do next. The advice was direct.

"If you are happy with that risk, tell them to fish or cut bait by next Friday."

Eight months after it began, the deal fell apart.

After the deal fell through, the owners chose to pause the sale process, focus on operations, and revisit a sale in about a year — this time with cleaner financials and a strategic buyer rather than a private equity firm. Michigan CFO Associates led the search for a new internal accountant and outside tax firm, both hired quickly, and began working through the tax cleanup and inventory corrections the first attempt had surfaced.

Attempt Two

Three months into the cleanup, a single prospective buyer emerged. Michigan CFO Associates quickly updated the financials and worked with the CPA firm that had prepared the original Quality of Earnings report to bring it current. The cause of the tax irregularities was well understood by this point, but the plan for resolving them on the books was not yet finalized.

During the buyer review, the team explained that the tax issues belonged to the owners personally and had no bearing on the business itself. The explanation held up, but the buyer's discomfort was clear.

The buyer eventually withdrew. It was a good strategic and business fit on paper, but differences in pace of change and customer focus, along with some questions about slowing growth, were enough to end the conversation.

Attempt Three

Two months later, with the tax issues fully resolved and the financials in order, the owners hired an industry veteran on a six-month contract to lead the search for a buyer with the right business fit. Michigan CFO Associates prepared an updated Quality of Earnings analysis and supporting financials for the process.

Where Things Stand

The deal isn't signed yet. But this attempt is going into the process with what the first two didn't have: clean books, resolved tax issues, and two rounds of hard-won lessons about what a buyer actually needs to see.

Whether the third attempt closes, the work that got the business here will make the next opportunity — whenever it comes — a stronger one.