The expression comes from the secondhand motor trade, as the name suggests, but this plague exists in every type of business in every corner of every economy. We've all had experience of it, and I have no doubt that a few readers may be practitioners of this nefarious dark art.
For some practitioners of this practice it is their hallmark. This is because in reality they are indeed serious purchasers backed up by significant financial firepower. Some sellers recognise this and are willing to engage with all and sundry that knock on their door in the knowledge, or perhaps in the hope, that the visit will end in a successful sale.
Given a positive, perhaps that should read “desperate”, attitude on the seller’s behalf it is probable that a sale will result.
But not a successful one.
Somebody who is prepared to act with dubious integrity is likely to continue to do so post-sale once the boot is on the other foot. You’ll spend your retirement embroiled in arguments, rancorous discussions and financial worry, specially engineered to wear you down and minimise any earn out obligations to you.
They are playing a numbers game. They know that for a given number of leads they investigate they will hit the magic pot of gold. They know that there is always a seller who either starts out desperate or becomes desperate. They hunt them down like a pig searching for truffles.
Rare but valuable.
Many a desperate seller is only desperate because he or she fails to understand how business sales work, in particular the time it can take to bring in initial leads and after that the time taken to get to contracts, which can fall through at any time prior to the ink drying on the paperwork.
A list minute flop is soul destroying. It is the depressingly gloomy culmination of months or even years of waiting and then a sudden burst of activity. Think cup-final after extra time as you watch your team sink on a penalty shootout.
The professional tyre kicker builds the time expended on finding their prey into their business model. Some will pull out much earlier than true due diligence if the seller conducts the negotiation robustly and sizes them up well but the true professional bides their time and strikes when the seller is at their most vulnerable – as the signing date draws close.
There will always be a legitimate reason, whether macro-economic, funding problems or discovery upon going over the due diligence sheets.
The problem with encountering these sorts when selling a business, (and an accountancy practice is no different) is that the prospective buyer is getting more than a look under the bonnet, he or she actually gets to see the inner working of the business, perhaps even get to check through client files and will be seeing your bank statement or VAT returns.
It’s a full engine strip-down and onto the ramp to inspect the bodywork from the inside – no tyre kicking here!
Some of them will so despicable as to be engaging in industrial espionage. In spite of its grandiose moniker it is not restricted to multinational firms – it can happen on your very own high street. Yup – on your doorstep. Terrible, isn’t it?
Some people will counter that if you want to make an omelette you have to break eggs. This is true but what more can be done to prevent the omelette running all over the kitchen counter?
You need to play them at their own game. Instead of them reeling you in, you reel them in.
It is the hunted who becomes the hunter.
You are turning the tables and it is you that is performing the due diligence on them.
When I deal with a buyer the first thing I insist upon is that they answer questions about their own business and finances prior to letting them anywhere near a seller's details. I have yet to come across a more effective and efficient way of dealing with timewasters.
Question them about their business past, make your own enquiries online – it’s never been easier. Get hold of their accounts and ask probing questions.
The ones who resist or try to hustle their way past me are given short shrift.
A serious buyer will never baulk at having to address legitimate preliminary questions. In fact, they will be pleased to see that they are dealing with a serious business that demonstrates it actually does mean business and is professionally managed. Long term buyers are in no rush to do the deal and if the seller is patient it will pay handsome dividends to the outgoing owners.
The bottom line is that nothing can guarantee that you won't get the run around or have the rug pulled from under your feet at the last minute. Perhaps the buyer is trying their luck or testing your mettle or sweating a bit, especially if the price is high, their funding has become dicey or market conditions have changed.
If it's any comfort it usually means the buyer has cold feet and, in all likelihood, would have made your life a nightmare post-sale.
But at least it means all the spadework has been done ready for actual buyer!