Beware of the Zombie Business Buyer!

In October 2020, I added a new category to our CRM database. To sit alongside the traditional TRADE BUYER, PRIVATE EQUITY, INVESTOR definitions, I have created the new option – ZOMBIE BUYER to help protect our client’s business interests and time…

What the author meant by a zombie buyer

In this account, I use “zombie buyer” as an informal label for an individual or newly formed company whose acquisition claims are not supported by evidence of funding, relevant experience or a track record. A new company or attendance at a training course is not, by itself, evidence that a buyer is unsuitable.

Over many years I have helped business owners prepare and sell their business as part of their retirement and exit preparations. As all experienced advisers can verify, there has always been a few buyers in the market who consider retirement sales as easy pickings, they specifically target and prey on business owners preparing to exit. Their goal is to put together some form of deal with little or no money down on completion, but instead a promise of a great future pay out once they have developed the business, all of course at the sellers risk.

At the time of writing, I was seeing more of these approaches, encouraged by these seminars and courses that promise quick success by acquiring established businesses with no money down or risk to yourself. A concept that acts like a magnet for “wantrepreneurs” and others who want to believe that building a business empire is quick, easy and risk free. Let’s be honest, experienced and successful business owners are commercially astute, rarely suffer fools and the few that may get drawn into this type of discussion will eventually reject the one-sided proposal. In my experience they most often targeted smaller owner-managed businesses.

Information and deferred-payment risks

Here is the problem, the Zombie buyer is not open or honest from the start about their intentions, they pretend to be something they are not, purposely creating ‘smoke and mirrors’ with websites, testimonials, claims of international offices etc. The zombie buyer will try to lull you into a false sense of security on the promise of a compelling business offer, will access commercially sensitive company information to put together their proposal, all at your risk, time and effort. A life and business distraction that leads nowhere positive for the seller.

A structured deal with deferred payments may be appropriate in some circumstances, including a turnaround, but it can leave the seller exposed if repayments depend on future trading. Compare the alternatives and take independent advice on funding, security and enforceability before committing.

A seller should compare credible offers on price, funding, payment timing and completion risk, rather than assume that any buyer category guarantees a good outcome. A careful buyer qualification process can help identify which approaches merit further discussion.

Checks before responding to an approach

An unsolicited offer may be part of a wider acquisition search rather than a unique approach. Check the buyer’s identity and rationale before disclosing sensitive information or agreeing terms.

If you choose to respond, check the buyer’s company record at Companies House where applicable, identify the individuals behind the offer and request references from previous acquisitions. Registry information is only a starting point: ask for evidence of funding and verify material claims independently.

Remember, your solicitor, accountant or friendly business adviser will always be happy to discuss your options, so talk to them in confidence and let them share their thoughts and knowledge. Many will have experienced similar zombie client approaches in the past.

Most business owners have more exit options than they realise, you only sell a business once, do it right and with no regrets.