Big Story

How Buyers Think During the First Seller Meetings

Key Takeaways

• In a structured sale process, management meetings generally happen after the indication of interest and before the letter of intent. The buyer has already formed an initial view of the business and a valuation range.

• Pepperdine’s 2026 Private Capital Markets Report shows how selective the process is. The median private equity respondent reported reviewing 76 business plans or memoranda, holding 20 meetings with principals, issuing 6 proposal letters or term sheets, signing 2 LOIs, and ultimately closing 1 deal.

• Buyers are trying to understand whether the business can operate without the seller, whether management’s account of the company aligns with the deal materials, and whether what they hear will withstand financial and operational due diligence.

In a structured sale process, buyers usually receive the confidential information memorandum, ask initial questions, and submit an indication of interest before being invited to a formal management meeting. The IOI normally contains a preliminary valuation range and transaction structure. Management meetings then give shortlisted buyers deeper access to the owner and leadership team before they decide whether to submit a more detailed LOI. The LOI is usually nonbinding with respect to the transaction itself, although provisions such as exclusivity and confidentiality may be binding.

The early conversations are partly about motivation. Buyers want to understand why the owner is selling, what role the owner expects to play after closing, and how committed the owner is to completing the transaction. The management meeting is where the buyer tests the assumptions behind the initial valuation. By this stage, the financial and operating information has already been reviewed. The buyer is now testing whether the people running the business reinforce the picture presented in the deal materials.

Does the management team understand its numbers? Can senior employees answer questions without relying on the owner? Does management describe the same customer base, growth opportunities, risks, and operating model presented in the CIM? A business with credible managers and repeatable processes gives the buyer more confidence that earnings can transfer after the seller leaves.

The selectivity of this stage is visible in Pepperdine’s 2026 Private Capital Markets Report. The median private equity respondent reported reviewing 76 business plans or memoranda, conducting 20 meetings with company principals, issuing 6 proposal letters or term sheets, signing 2 letters of intent, and closing 1 deal.

Price remains one of the main reasons deals fail. Investment bankers in the same Pepperdine survey reported that a median of 32% of sell-side engagements ended without a transaction. The most commonly reported reason was a valuation gap between buyer and seller. Among respondents reporting deals that failed over price, the most common gap was only 11% to 20%.

The buyer pool is also changing. BizBuySell’s Q2 2026 Insight Report found that 46% of buyers identified as corporate refugees pursuing business ownership, while 48% of brokers reported increased search-fund and Entrepreneurship Through Acquisition activity. 78% of buyers said they expect to use SBA financing. The meeting should work in both directions. Sellers can use it to understand the buyer’s financing readiness, operating experience, plans for employees, expected transition period, and ability to close.

Preparation comes down to consistency. Explain the reason for selling clearly. Let managers answer questions about the areas they run. Know working capital patterns, customer concentration, owner responsibilities, recurring revenue, and the assumptions behind major add-backs. The strongest meeting does not require perfect answers. It requires answers that remain consistent when the buyer later compares them with tax returns, financial statements, customer data, and the rest of the diligence record.

Governance Feed

1. The SBA will hold a public forum on September 17 to take testimony on two proposed rules that could change how businesses qualify as “small” for federal programs and contracting. Both proposals were published on August 20, and testimony from the forum will become part of the formal record used to shape the final rules. The SBA is specifically encouraging federal contractors and organizations involved in small-business financing to participate.

2. Acquisition financing could get more expensive again. Goldman Sachs and J.P. Morgan now expect the Federal Reserve to raise rates by 25 basis points at its September 15-16 meeting, with markets pricing in about an 87% probability. For buyers relying on floating-rate acquisition debt, another increase would put additional pressure on debt service coverage and the purchase price a business’s existing cash flow can support.

3. Hilco Global’s Eric Kaup said companies with underperforming divisions should prepare a wind-down alongside any sale process, rather than waiting for a failed auction. In one example, Pitney Bowes’ Global Ecommerce unit was losing more than $100 million a year across 13 facilities before Hilco acquired it for $1 and wound it down. Hilco completed the process for about half of Pitney Bowes’ internal budget and in roughly two-thirds of the projected time. In another case, it sold 6 of Design Group Americas' 9 businesses individually after no buyer emerged for the entire U.S. operation.

4. Tennessee recorded 103,220 business applications in 2025, up 14.3% from the previous year. The SBA also approved 1,046 loans totaling $593.5 million for Tennessee small businesses in fiscal 2025, while private-sector employment reached about 2.84 million jobs in 2024, up 8.6% from 2019.

Thesis Principle

An earnout pushes part of the purchase price beyond closing, when the buyer controls many of the inputs that determine whether the seller gets paid. The buyer can reduce EBITDA by allocating parent-company overhead, changing revenue recognition, directing new business away from the acquired company, or deducting indemnification claims from earnout payments. The protections need to be written into the agreement. Where practical, tie the earnout to revenue instead of EBITDA, since revenue gives the buyer fewer ways to influence the calculation.

Resources & Events

📅 Midwest Capital Connection (Chicago, IL - October 7-8, 2026)

ACG Chicago hosts its flagship networking event at Navy Pier, drawing capital providers, advisors, entrepreneurs, and service providers focused on middle market M&A. With over 100 investment banks in attendance and structured one-to-one meeting scheduling, the two-day program is built around deal sourcing and relationship building across the Midwest deal community. Details →

📅 Florida ACG Capital Connection (Amelia Island, FL - November 3-5, 2026)

Hosted by the four Florida chapters of ACG at the Ritz-Carlton, Amelia Island, this conference brings together more than 1,000 private equity investors, investment bankers, lenders, family offices, and advisors focused on middle market dealmaking. As the final ACG conference of the year, it serves as a pipeline-building event heading into 2027, with several days of scheduled meetings and networking across the Southeast deal community. Details →

📊 Report Spotlight: 2026 Private Capital Markets Report (Pepperdine University)

Pepperdine’s 2026 Private Capital Markets Report found that the median investment banker sees 32% of sell-side engagements end without a transaction. Among failed deals, the most common buyer-seller valuation gap was just 11-20%. Separately, 64% of sellers had done no formal exit planning before going to market, while only 26% had met with an advisor beforehand. Read →

For the Commute

The $40M Earnout That Never Got Paid (Built to Sell Radio)

Garren Hilow bootstrapped Abveris, an antibody discovery business generating $12 million in revenue, and sold it in 2021 for $150 million up front, with an additional $40 million earnout. His team came within 1% of the revenue target, and the acquirer said they had missed it, refused to share the accounting behind that conclusion, and dared him to sue. Rob Walling sold Drip with 40% of his purchase price tied to an earnout and collected nearly all of it. John Warrillow puts the two founders side by side to work out what separated the outcomes, including why revenue-based earnouts hand the acquirer the leverage, why the reporting clause Hilow left out of his agreement matters, and why more cash at close makes a buyer less likely to fight over the back end.