Thinking about buying a family-owned business?
You’re not alone—and you’re not the first to encounter emotional resistance, financing hurdles, or last-minute surprises that can derail a deal. Many buyers make it through weeks of due diligence, only to see everything fall apart right before closing.
In this post, Patrick O’Connell—an M&A advisor with over a decade of experience in the middle and lower middle market—shares the real-world challenges of acquiring legacy family businesses. He outlines the five most common deal-killers buyers face and breaks down exactly how to navigate them step by step.
Whether you're actively pursuing a business or just preparing for the process, this guide will help you close with confidence—and avoid the drama that stops so many deals short.
Before we get into the technical details, let’s talk about something you might’ve seen before.
If you’ve watched the show Succession, you’ve seen a family media company owned by Logan Roy, with sons and daughters navigating who will take over. It’s dramatic. But it’s also not far from what real buyers experience when they approach legacy family businesses.
There are emotional ties. There are sons or daughters involved in the company. And there’s a founder who’s deeply ingrained in the operations, culture, and relationships that make the business tick.
Family-owned businesses come with layers of complexity:
Owners have often worked in the business for 30, 40, even 50 years
Their identity is tied to the business
Formal processes may not exist (no SOPs)
Family members may hold key roles
Employees may fear cultural shifts or layoffs
Buyers often encounter resistance—emotionally, financially, and culturally
As a result, even profitable, well-run businesses can be difficult to acquire.
Patrick breaks down the five biggest threats to closing a deal with a family business owner.
Many owners say things like:
“This business is my life.”
“What if the new owner ruins everything?”
“I don’t actually want to retire.”
Their hesitation can emerge late in the process, even after they’ve agreed to terms. Buyers need to understand why the owner is selling. It’s rarely just about money. Often, it’s about trust, legacy, and identity.
You may face problems such as:
Unclean financials
Sellers demanding all-cash deals
Bank lending issues
Liquidity shortfalls near closing
Sometimes, financials are messy due to poor accounting—not because they’re materially misstated. In those cases, clean-up can be part of your 90-day post-acquisition plan.
Sellers often base their valuation on emotion, industry gossip, or what friends have sold their businesses for.
They may believe:
Their personal expenses should be “added back”
Their total investment should be paid back at closing
Their business should trade at a premium based on years of hard work
But buyers (and banks) view valuation through earnings—specifically, normalized EBITDA.
This gap between emotional pricing and market value can stop a deal in its tracks.
Employees may have worked for the owner for decades. They trust the current leadership, fear layoffs, and worry about culture changes.
Key relationships are at stake:
Employee retention
Community ties
Long-standing customers
Buyers aren’t just acquiring a company—they’re inheriting a reputation. Winning the trust of employees is critical.
After 90 days of diligence, surprises can still emerge:
Inflated earnings
No formal customer contracts
Unrecorded liabilities
Back taxes
Funding shortfalls
If a seller is fatigued from the diligence process, even a small hiccup can derail the deal.
I’ve included the full webinar below, where I walk through the five biggest deal-killers that come up when buying family-owned businesses. If you’re exploring a potential acquisition or already in the middle of one this session will help you anticipate challenges, structure better deals, and move forward with more confidence.
Ask questions early:
Why are you selling?
Why me?
What legacy do you want to leave?
This helps build a relationship—and reduces late-stage fear or hesitation.
Some sellers will stay on for 12 months to ease into retirement. This helps:
The buyer learn the business
The seller feel more secure about handing over control
Both parties build trust
Phase transitions benefit both sides and create continuity.
When cash is tight or valuations don’t align, structure matters. Tools include:
Seller notes: The seller takes part of the payment as a loan
SBA 7(a) loans: Government-backed, up to $5 million
Milestone-based payments: Payout based on performance
Partial equity buyouts: Buyer purchases 80%, seller retains 20%
These tools reduce risk and close the funding gap.
Use financial due diligence to strip out personal expenses and show the business’s true earnings. Compare:
Reported financials
Normalized EBITDA after adjustments
Walk the seller through the differences so they understand your position.
Before formal due diligence, align on:
Price
Working capital
Transition plans
Employee conversations
Legal structure (asset vs. stock sale)
This reduces broken deal costs and improves transparency.
Patrick recommends speaking to 1–2 key team members before the close—especially if one is expected to run the day-to-day operations.
Ask:
Do I align with this person?
Will we work well together?
Are they committed to staying?
Many buyers regret not doing this.
Patrick sums it up like this:
Be patient
Be flexible
Be prepared
Successful deals happen when you anticipate problems, address concerns early, and surround yourself with a team that’s been through it.
If problems come up, ask:
Are these red flags or yellow flags?
Red flags = deal-breakers
Yellow flags = operational challenges you’ll address post-close
Always consult your team before going back to the seller. And when tough conversations happen—do them in person or on the phone. Not over email.
Family business acquisitions are unique.
They carry emotion, history, and human complexity. But with the right mindset and structure, you can close these deals and do so in a way that honors the legacy while protecting your investment.
Use this checklist:
Understand the seller’s why
Align on structure and expectations early
Build trust with employees
Prepare for diligence fatigue
Leverage seller financing and SBA loans
Be the right steward of the business
This approach works. And it helps buyers like you avoid broken deals, save time, and build something sustainable.
Contact us today to learn how we can support your next deal.