Don’t Call It A Comeback

The Breakdown

This was a solid business:

• $1.5 million in adjusted EBITDA

• Strong municipal and commercial contracts

• Good fleet condition

• Defensible market position

The financing package was exceptional:

• 90% financing at Prime + 2% on a 10-year amortization SBA 7(a) loan

• $700,000 buyer equity injection

• For a towing company, which many lenders won't touch, this is as good as it gets

So what changed in the sellers' minds?

Revenue through August 2025 came in 12% higher than the same period in 2024. In the sellers' view, this meant the business was suddenly worth 12% more than the purchase price they'd already negotiated.

Three problems with this logic:

1. The prior three years had been essentially flat. You can't extrapolate enterprise value from five good months when the trend data doesn't support it.

2. Towing has seasonality factors. Harsh winter weather, construction season timing, and municipal contract cycles all affect when revenue hits. A hot summer doesn't predict a hot winter.

3. They'd already agreed to $5 million based on a full trailing twelve months of financials. You can't renegotiate after due diligence starts just because you looked at your YTD dashboard and liked what you saw.

But here's the thing about sellers: they don't always operate rationally, even when they have advisors and brokers telling them they're making a mistake.

What NOT To Do (And What To Do Instead)

When my buyer got the news, his first instinct was to get angry. I don't blame him. He'd spent close to $30,000 on legal fees and the quality of earnings report. He'd invested 60 days of his time. He'd turned down other opportunities to focus on this one.

But getting angry would have been the worst possible response.

Here's what you should NOT do when a deal dies late in the process:

• Send an emotional email or leave an angry voicemail

• Threaten legal action, even if you think you have grounds

• Burn bridges with the broker, the seller, or anyone in their orbit

• Badmouth the seller to other brokers or in searcher forums

• Write the deal off as dead forever

Here's what you should do instead:

1. Acknowledge the decision professionally and briefly

My buyer sent a two-sentence email: "I understand and respect your decision. We're disappointed but appreciate the time invested by everyone involved."

That was it. He copied the broker and the seller's attorney. Nothing more was needed.

2. Document everything immediately

• Compile all your due diligence materials

• Save the quality of earnings results

• Document the financing terms you received

• Archive every email thread related to the transaction

• Calculate the actual dollars you spent

You'll need this information later.

3. Debrief with your financing broker

In our case, we walked through exactly why the 90% financing package we'd secured was nearly impossible for another buyer to replicate. Most lenders won't finance towing companies at all. The few that will typically max out at 70-80% loan-to-value.

Understanding this gave my buyer leverage for when (not if) this deal comes back around.

4. Send one follow-up message five to seven days later

Something simple: "If circumstances change, we remain interested at the previously agreed terms. Happy to reconnect anytime."

Then go completely dark. No checking in. No "just following up" emails. Nothing.

Sellers who get cold feet need space to realize their mistake without feeling pressured.

The Pivot

After you've handled the immediate response, you need to shift your mindset.

You didn't lose a deal. You gained data and experience.

The due diligence you completed has real value:

• You now know exactly what a quality towing operation looks like under the hood

• You know what questions to ask earlier in the process next time

• You know how the financing works for this industry

Your immediate job is to reactivate your pipeline:

• Contact your broker network and let them know you're back in the market

• Review other opportunities you passed on while focused on this deal

• Apply what you learned during due diligence to evaluate new targets faster

You also have momentum working in your favor:

• You just secured financing approval (makes you more attractive to other sellers)

• You've been through a full due diligence process (you know what to ask for upfront)

• Your entire team is warmed up and ready to move quickly

The mental game matters here. The average searcher looks at over 100 deals to close one. Late-stage failures are just part of the process. They're not a reflection on you, your offer, or your abilities as a buyer.

Sixty days feels like a lot of wasted time right now. But in six months when you're closing a better deal, this will feel like a bullet you dodged.

Why This Deal Is Coming Back

Here's the part that might surprise you: I'd estimate that 40-60% of deals that die at the late stage come back within six months.

It's especially common when the seller's reason for backing out was "we think we can get more money." And it's even more likely when the original buyer had financing locked.

Our towing deal is almost certainly coming back. Here's why:

Financing Reality Is Going to Hit Hard

We secured 90% financing for a towing company, which is exceptional. Most lenders won't touch the towing industry at all (equipment damage, liability exposure, inconsistent cash flows).

The lenders who will finance towing typically max out at 70-80% loan-to-value.

What this means:

• Any new buyer needs significantly more cash to the table

• Higher cash requirements = smaller buyer pool

• Smaller buyer pool = fewer offers and worse terms for the seller

Market Timing Is Going to Work Against Them

The sellers think they're in a hot market because of five good months. But Q4 and Q1 are typically slower periods for towing services. Winter weather patterns are unpredictable. Things slow down.

When the year-to-date numbers normalize over the next few months, their entire "we're worth more" argument is going to evaporate.

Deal Fatigue Is Real

The sellers already invested significant time and emotional energy into our due diligence process. Starting over with a new buyer means another 45-60 days minimum before they can close.

If that new buyer wants their own quality of earnings report, it means more disruption to operations and more questions for management and staff.

Each restart increases the risk that key employees figure out the business is for sale and start looking for other jobs.

Here's what typically happens:

1. The seller re-lists the business or quietly reaches out to other buyers

2. Those buyers either can't match the price expectations or can't secure financing

3. Two or three months pass

4. Business performance normalizes

5. The sellers realize they're not getting $6 million

6. Their broker calls you back: "My clients are ready to reconsider your offer"

At that point, you have all the leverage:

• You've moved on (or at least appear to have)

• You already know the business intimately

• You have proof that financing is difficult to secure

• The sellers have wasted 90+ days and are motivated to close

Protect Yourself The Second Time Around

When the seller circles back, you need to protect yourself. The original letter of intent was clearly not enough to keep them committed.

Your updated LOI should include:

1. A Breakup Fee

If the seller terminates the transaction after you re-enter due diligence, they pay you $25,000 to $50,000. This covers your quality of earnings costs, legal fees, and time invested.

Breakup fees are standard in larger M&A transactions. After getting burned once, it's completely reasonable to request one.

2. A Shorter Due Diligence Period

You already reviewed everything during the first round. You need 30 days maximum this time, not 60.

A tight timeline reduces the seller's opportunity to waver again or start second-guessing the decision.

3. Material Adverse Change Clause With Teeth

Define clearly what business metrics would justify you walking away from the deal. If the sellers tried to reprice the business based on five months of revenue data, you need protection against them doing that again.

4. Adjusted Seller Financing Terms

If they wasted your time and cost you money, the seller note interest rate could increase by 50 to 100 basis points. You could also raise the seller note amount to reduce your buyer equity component or outside loan amount.

The psychology matters here: You're being prudent, not petty. The sellers demonstrated that their word and their signature on an LOI aren't sufficient to keep them committed.

Most sellers who return after backing out will accept reasonable protections because they know they messed up the first time.

If they balk at a breakup fee or tighter terms? That's actually a red flag that they might flake again. In that case, you're better off walking away permanently.

The Bigger Picture

Every successful buyer has walked this exact path. Deals die for reasons that are often completely outside your control.

Your job isn't to achieve perfection or to prevent every possible failure. Your job is to maximize the probability of closing while protecting your downside.

The towing deal might close in 90 days with better terms. Or my buyer client might find something better in the meantime. Either way, he handled the situation correctly:

• Stayed professional

• Documented everything

• Maintained relationships

• Moved on to other opportunities

At CapFlow, we maintain relationships with buyers even when deals fall apart. Your financing approval doesn't expire. Our lender relationships don't go away. When the next opportunity comes along (whether it's this towing company or something else entirely), we're ready to move fast.

The key is to stay in the game and trust the process.

Dead deals are part of buying businesses. They're not a reason to stop buying businesses.

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