Jonathan Jay – When Buying a Business Understand That Due Diligence Won’t Reveal Everything

Jonathan Jay has bought and sold businesses for over 20 years, buying from private equity firms and selling to them as well and has also done numerous trade deals. In the last few years, he has brought his knowledge to the world through The Dealmakers Academy, which is a UK leader in training people to buy and sell businesses without risking their own capital. For the first time, he is now teaching dealmakers how to source and negotiate deals to generate cash flow and exit opportunities without them having to work in the business day-to-day and as a bolt on to an existing business. You can gain free access to Jonathan's webinars and latest book, “Business Buying Strategies - The Solution to Your Business Growth Problem” and attend one of his low-cost discovery sessions. Each year he manages a select group of dealmakers through their first acquisition and in some cases, partners with them to create a powerful deal team.   “Some businesses are too perfect that there isn’t any value to be added by the new owner. What I look for is a business with enough headroom for myself and my team to actually add value to it. With the value that we add, comes the growth of the business.” Jonathan Jay   Worst investment ever The rough acquisition Jonathan was told to approach a certain company in a sector that he already had invested in before and did well. Since he did not want to let an opportunity pass, he met with the owners of the company and discovered that they wanted to sell the business. They were open about the finances of the business, and Jonathan could see that it had done better in the past year or so. Jonathan and his team spent a couple of months doing their due diligence with intensive research and crunching some numbers. Although they had discovered some things that were not particularly good, they had expected these kinds of things in the business of buying businesses. “It’s not all going to be a bed of roses,” Jonathan reminded himself. He dived into that acquisition with his eyes opened. But the reality was just terrible. A stressful transition Nothing seemed to be right after the acquisition. The business had every problem and every issue Jonathan could ever imagine. The staff, the delivery, the supplies, and the finances just all went south. The next six or seven months were a total nightmare because all they did was putting out one fire after another. The only incentive Jonathan had to continue was that at least the company was making money despite being terribly managed. However, that little profit won’t compare to how stressed Jonathan was for that whole seven months. Indeed, after eleven months of firefighting, he sold the company. You don’t get the culture during due diligence Jonathan believed that the...