Can The Buyer Actually Pay? Understanding Buyer Credibility in M&A

1. “How do you like to qualify whether a buyer actually has the capital to close a deal?”Gut check vs. formal proofDifferences between PE-backed and strategic buyersWhat’s reasonable to ask for and when in the process   2. “What are some of the best ways a buyer can demonstrate proof of funds early in a process?”Equity commitment lettersBank letters or balance sheetsFund-level detail for PE buyersIs a LOI ever enough?   3. “When you see a buyer lean heavily on an earnout or seller note, what does that tell you about their financial strength?”Earnouts as risk-transfer vs. alignment toolSign of limited capital vs. aggressive valuationHow to structure a seller note to reduce risk   4. “Have you ever had a deal fall apart because the buyer couldn’t come up with the money?”Anecdotes of broken deals or red flags missedWhat should have been asked earlierLessons learned about screening buyers   5. “What questions should sellers be asking to vet a buyer’s financial capacity?”Go-to questions to ask PE firms, family offices, strategicsWhat not to ask (or how not to ask it)How advisors help behind the scenes to validate   6. “If a seller gets an offer that looks strong on paper — big multiple, big earnout — what’s your advice for validating it’s real?”The danger of being ‘seduced by the headline multiple’Discounting for deal structure riskHow to tie offer strength to real-world execution ability   7. “Are there particular red flags you see when a buyer isn’t financially credible?”Delayed diligence or ghostingLack of transparency around capital sourceToo many approvals needed — unclear decision-makersOffers contingent on future fundraising   8. “What’s the advisor’s role in protecting the seller from wasting time with unqualified buyers?”Quietly vetting buyers behind the scenesManaging buyer engagement based on credibilityPulling in references or past deal history   9. “What’s your take on PE firms that haven’t yet closed a platform in the space — does that change how we qualify them?”Platform vs. add-on credibilityOperational readiness of first-time buyersImportance of fund age and deployment schedule   10. “At what point in the process do you think it's fair for a seller to ask for hard financial evidence?”Pre-LOI vs. post-LOIHow to handle it without offendingWhen to walk if transparency isn’t there RELATED EPISODES Episode 203: Selling Your Business to an Independent Sponsor. Listen now >> Episode 113: Deal Financing- Scenarios, Options and Implications for Both Sides. Listen now >> Episode 97: Understanding Search Funds as an IT Services Seller. Listen now >> Episode 99: IT Services Sellers: Evaluating the Size of a Buyer. Listen now >> Listen to Shoot the Moon on Apple Podcasts or Spotify. Buy, sell, or grow your tech-enabled services firm with Revenue Rocket.