Selling My Family’s Business Part 2: Building Something the Market Would Buy

Most businesses don’t fail at closing because of the buyer. They fail because of what was never resolved before the conversation started. 

Nate O’Brien spent 18 months doing everything right. He helped his parents build a stronger business, assemble the right advisory team, and run a controlled auction that drew serious interest. They chose a buyer, negotiated favorable terms, and pushed through 90 days of diligence. Then, the night before closing, a demand letter arrived. Part 2 of this three-part series follows the preparation that made the business sellable, the process that proved its value, and the moment unresolved history nearly undid all of it. 

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Building the advisory team before going to market 

Over the next 18 months, I helped my parents assemble the advisory team they would need. I introduced them to a wealth manager who specializes in working with business owners preparing for liquidity events, so they could model what the proceeds would need to look like to fund the next stage of their lives. I connected them with a mergers and acquisitions (M&A) advisor who could run a controlled auction and an M&A attorney who could manage the legal documentation throughout the process. 

I also gave my parents a specific list of items to address in their financials and operations before going to market. The goal was to make the business as attractive as possible to a buyer and to reduce the risk premium a buyer would assign to it. Over the following year, unadjusted EBITDA increased by over 400%. That was not a normalization exercise. That was a real operational improvement, the kind that comes from running a tighter business with a transaction on the horizon.  

On top of that, when we applied normalizations to reflect the business’s true recurring earnings power, the picture improved further still. The combination is exactly why owners who prepare before going to market consistently outperform those who do not. 

We engaged the M&A advisor, completed pre-diligence work, and prepared a confidential information memorandum. The go-live date was set. 

What to do when sellers get cold feet before a business sale

One week before launch, my parents called me. They were rattled. Market uncertainty under the new administration in early 2025 had them second-guessing everything. But underneath the market concerns was something more personal. My mother said something along the lines of “Who would even want us?” It is a feeling I hear from business owners more often than you might expect. You spend decades with your head down building something, and when it comes time to put it in front of the market, you suddenly feel exposed, uncertain whether what you have built will resonate with anyone on the outside. 

I told them what I genuinely believed: you don’t know until you do this, and we’ve done all this work to get here. We’re casting a wide net. You might be surprised. I also reminded them of something equally important: going to market does not lock you into anything. You aren’t obligated to accept any offer. You are not committed to any buyer. All you’re doing is finding out what the market thinks, and at the end of that process, you still decide whether to transact, with whom, and on what terms. The market will tell us what this business is worth, but you have to let it speak. 

They went to market the following week. 

What a controlled auction process looks like—and what it can yield

The response was strong. Multiple serious indications of interest came in, with the top offers ranging from 5x to 7.5x normalized EBITDA. My parents had options, which is exactly what a controlled auction process is designed to create. 

The highest offer came from a private equity buyer. It was compelling on the operating business, but the terms on the real estate component weren’t acceptable. A strategic buyer, itself a long-term family business, had submitted an offer at 5.5x. In a controlled auction process, having multiple serious offers creates the opportunity to go back to the market with better information. We did that, and the strategic buyer came up to 6.5x. My parents accepted. 

There was something meaningful about that outcome beyond the number. My parents had built a family business over the decades, and they were selling it to another family business. The cultural alignment mattered to them. The buyer understood what they were acquiring, not just the assets and the lab capabilities, but the people and the relationships that had built the company. 

How deal structure affects minority shareholders in a family business sale

Up to this point in the process, communication with the minority shareholders had been limited. My father and uncle had been in close contact throughout, but my aunt and the uncle who had returned as a contractor had not been formally engaged. Given my aunt’s history of litigation and embezzlement, the decision to limit information flow was deliberate and legally defensible. But it created a problem when the time came to move toward a letter of intent. 

The transaction had originally been structured as an asset deal, which is the more common starting point in transactions of this size. Recognizing that the company was a C corporation and that an asset sale would subject the proceeds to taxation at both the corporate and shareholder levels, we negotiated with the buyer to convert the sale to a stock deal. To their credit, the buyer accepted. For the shareholders, the difference was meaningful: roughly $1.0 million in additional after-tax proceeds that would otherwise have gone to the IRS. We had worked hard to get there, and in many respects it was a genuine win for everyone at the table, including the minority shareholders who’d contributed nothing to making it happen. 

What we didn’t fully appreciate in that moment was what we’d just handed them. A stock deal requires signatures from every shareholder. What had been a straightforward closing condition under an asset deal structure suddenly gave two people with complicated histories and unclear motivations an unexpected source of leverage.  

The same negotiation that put an extra $1 million in the shareholders’ pockets had also just given the most difficult ones a seat at the table. 

My uncle moved first. He claimed his ownership percentage was incorrect, that it should be 10% rather than the approximately 2% consistently reflected in company records, and that he had always intended to repurchase the shares he had sold back two decades earlier. After careful review of cold, sloppy documentation, much of it prepared by my aunt during her time with the company, we found that while he had expressed intent to repurchase those shares, he had never actually done so. Shareholder meeting documents consistently recorded his interest at approximately 2%, not 10%. And not once, across years of shareholder meetings, had he ever signed those documents. He had never disputed the 2% figure in writing, never raised the issue during any of the meetings where ownership was documented, and never followed through on the repurchase plan he claimed to have always intended. The record was clear. His position was not. 

Why unresolved ownership disputes become leverage at the closing table

We made a difficult decision. We allowed him to purchase his remaining shares back at the price originally agreed to in the early 2000s, which, given two decades of inflation and the value the business had built since then, was a significant concession. But it came with terms. In exchange for the restored ownership stake and his share of the proceeds, he agreed to leave the company on the day the transaction closed. It was not the outcome anyone would have designed in hindsight, and frankly, it was not a negotiation anyone had the bandwidth for in the middle of an active diligence process. But it resolved the dispute, drew a clean line, and kept the deal moving.  

Sometimes in a transaction, you make the pragmatic call, not the fair one, because the clock is running and the alternative is worse. That’s the cost of unresolved issues that were years (in this case, decades) in the making. The time to address an ownership dispute is not during a 90-day diligence window with a buyer waiting. It’s long before anyone is even thinking about a transaction. 

Full diligence resumed. In closely held businesses, the reality of a diligence process is that it almost always falls disproportionately on one person. There’s typically one individual who knows where everything is, has relationships with the accountants and attorneys, and can answer the buyer’s questions with real authority. For my family, that person was my mother. She continued in her role as office manager while simultaneously managing a 90-day diligence window, fielding requests, organizing records, and keeping the process moving. It was an enormous ask, made more manageable by the pre-diligence work we had completed, but still effectively a second job on top of her existing responsibilities. Despite running on E for three months, things with the buyer were going well, and diligence was almost complete. 

The evening before the initial closing date, my aunt’s attorney sent a demand letter. I remember exactly where I was when it came through. After three months of diligence, after resolving the ownership dispute, after watching my family run on empty for 90 days to get us to the finish line, we were hours away from closing. And then the letter arrived. 

It was the kind of document that makes your stomach drop. The claims were thin and in our view largely without merit, but that almost didn’t matter. What mattered was that we needed her signature, and she knew it. The demands were significant, north of $500,000 in additional proceeds from my father and uncle. I made calls to the M&A attorney, the M&A advisor, and others in my network. Everyone understood what was at stake. There was no backup plan. There was no second buyer waiting in the wings. Walking away from a closed negotiation on the eve of closing to fight a demand letter was not a position anyone wanted to be in. My parents were distraught. Honestly, so was I. 

We sat with it overnight and came back with a counter. We countered at about a quarter of the requested amount, split between my father and uncle, contingent on my aunt signing a representation letter releasing them from future litigation. It was painful. It felt deeply unfair. But it was the decision that got the deal done. 

The transaction closed the following week. 

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Selling My Family’s Business Part 3: What I Would Do Differently