The Leverage Playbook: How to Win Deals You Shouldn't Win

The LMM is a Different Game

Businesses doing $1M to $10M in EBITDA operate by different rules than mega-deals.

The buyer pool is small. Sellers are often first-timers. Relationships matter more than optimal pricing. Regional banks dominate. Information flows through conversations, not data rooms.

Most importantly: LMM sellers routinely take less money from the "right" buyer.

I've watched sellers turn down $8M to take $7.2M because the lower bidder committed to keeping the team intact. This isn't irrational. This is what happens when someone spent 25 years building something they care about.

Your job isn't just to make an offer. It's to create conditions where the seller wants YOUR deal more than the alternatives.

That's leverage. Let's build it.

1. Create Competition (Even as the Only Serious Buyer)

Sellers negotiate differently when they think others are interested. You don't need to lie. You need to position yourself correctly.

When asked "are you looking at other businesses?" don't say "no, just yours." Say "I'm evaluating two opportunities this quarter, but yours fits best with what I'm building."

You're being honest. You ARE looking at multiple deals. You just positioned yourself as selective rather than desperate.

Timeline urgency works even better. "I need to decide by end of Q2 because my financing window and capital commitments are lined up" creates pressure. "I can move whenever" creates indifference.

The proprietary deal is your best leverage. A buyer spent eight months building a relationship with the owner of a $12M revenue distribution company through industry events. Never pushed. Just built trust.

When the owner decided to sell, he called this buyer directly. No broker. No auction. The deal closed at $6.8M. The broker later said he could have gotten $8.5M on the open market.

Off-market deals give you leverage before negotiations even start.

2. Differentiate Through Structure

Most buyers want 80% bank financing, minimal skin in the game, and a clean exit. Which means they all look identical.

Win through structure, not just price.

Seller financing changes everything. You're bidding against two all-cash offers on a $10M revenue service business. Propose: "I'll match at $7.5M, but I'd like you to hold $1.5M as a subordinated note at 9% for five years."

Why would a seller accept this? You just signaled confidence in the business. You improved their tax situation by spreading the gain. And you gave them retirement income.

This wins deals even when your up-front consideration is lower.

Rollover equity works for the right seller. Target someone who's 55-60, successful but not ready to fully retire. Offer 25% equity in the combined business plus a strategic advisory role.

One buyer offered $7.5M all cash for a $2M EBITDA manufacturing business. Another offered $6M plus 30% rollover. The seller took the lower cash amount because he wanted to participate in the growth story he knew was there. The buyer sold him on the “second bite of the apple” being much more lucrative than getting more up-front now.

Earnouts reduce your risk and keep sellers engaged. Structure: 65% at close, 35% over two years based on hitting EBITDA targets the seller actually controlled. This cuts your upfront cash need and keeps them motivated through transition.

3. Become the "Right" Buyer

LMM sellers have emotional attachments that financial buyers can't understand. They care about employees, customers, community, and legacy.

And they'll take less money from someone who gets it.

Figure out what THIS seller cares about beyond the wire transfer. Ask about their proudest moments. Ask about concerns. Ask what they want their legacy to be.

Then put commitments in your LOI that address those concerns.

A buyer won a $12M revenue business by committing to keep the founder's daughter as COO for three years at current comp. Competing offers were $600K higher. The seller chose continuity over cash.

Another buyer committed to maintaining the company's apprenticeship program and community partnerships. Cost maybe $40K annually. Saved $400K on purchase price.

This isn't manipulation. It's understanding human motivation.

4. Turn Due Diligence Into Renegotiation

Quality of earnings reviews almost always find issues. Customer concentration. Aggressive add-backs. Deferred maintenance. Declining margins.

These aren't deal-killers. They're leverage.

Present findings professionally: "We found some things that change our risk profile. Let's figure out how to address them together."

A buyer discovered the top customer (representing 35% of revenue on a $9M business) was under contract renegotiation. That's material risk. Result: 10% purchase price reduction plus $200K escrow.

Another found $300K in deferred equipment maintenance on a $2M EBITDA manufacturer. They negotiated a $250K holdback to cover year-one capex.

The key: approach DD findings as problem-solving, not gotchas. You'll get better results and preserve the relationship you need for transition.

5. The Speed and Certainty Premium

First-time sellers are terrified deals will collapse. Because most deals do.

Credible speed and certainty are worth real money.

Pre-arrange financing before you find a target. Build relationships with three regional banks now. When you go under LOI, get term sheets within two weeks.

A buyer told a seller: "I can close in 40 days. Financing is committed, my attorney has reviewed structure, and my accountant is ready for QoE." His competition planned 75 days with multiple contingencies.

He got a 7% price reduction for certainty and speed on a $2M EBITDA deal. That's $350K for being organized.

Earnest money signals seriousness too. Most buyers put down 1-2% fully refundable. Try 5% with partial non-refundability (you get it back for legitimate DD issues, not cold feet).

Sellers discount for serious buyers.

Stack Your Leverage

Each tactic gets you 2-5% advantage. Three tactics combined get you 15-20%.

Real example: Buyer found an off-market $11M revenue, $2.2M EBITDA logistics business.

His approach:

• Proprietary deal (no competition)

• 25% seller financing ($1.8M note)

• Committed to 18-month employee retention

• 60-day close with 4% hard deposit

The business would have sold for $9M in a competitive process. He closed at $7.5M. That's 17% below market by stacking leverage points.

What's Next

Winning the acquisition is half the battle. Next newsletter, we're covering the financing leverage game: playing lenders against each other, structuring deals for better terms, and negotiating your personal guarantee.

The right financing approach can save you as much as negotiating purchase price.

Start Building Leverage Today

You don't create leverage during negotiations. You build it systematically beforehand.

• Build relationships with 5-10 potential sellers in your target industry now. When they're ready to sell, you get first call.

• Develop your "right buyer" story. Why are you the best steward for their business? Get specific.

• Assemble your deal team today. Attorney, accountant, lender relationships. Speed matters when you find a target.

The best LMM deals don't go to buyers with the most money. They go to buyers who have built the most leverage. Start building yours today.

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