FROM MIKE'S DESK
Over 35 years, I've evaluated more than half a billion dollars in potential acquisitions. I've closed on a fraction of them. Roughly one out of every ten deals I seriously look at becomes a deal I actually pursue.
That number surprises people. They assume that somebody with my background should be closing everything that crosses the desk. Or at least most of it. The math doesn't work that way.
Here's the truth. The skill in this business isn't finding deals. Deals are everywhere. The skill is passing on the ones that look good.
Any broker can put a listing in front of you that pencils on paper. Any spreadsheet can tell you the DSCR covers the debt. Any buyer who wants to close a deal badly enough will find a way to convince themselves this one is the one. The entire industry is built around getting a yes. The broker wants the commission. The seller wants the exit. The lender wants the loan on their books. The only person in the room whose interests are served by saying no is you.
So you have to be the one who says it. Often. And without apology.
Here's the filter I've used to pass on nine out of ten deals.
First, the math has to work at a stressed baseline, not a perfect one. If the deal only pencils when revenue holds flat and no customer leaves and no rates move, it doesn't actually pencil. The Bulletproof criteria exist for this reason. A DSCR of 2.0x at stress means the deal survives a bad year. A DSCR of 1.3x at best case means the deal survives nothing.
Second, the seller has to be the kind of person I'd want to call if I had a question in year two. I've walked from deals where the numbers were fine and the seller was fine, just for a feeling that the seller was hiding something or didn't actually like the business they'd built. That feeling is almost always right. It took me twenty deals to learn to trust it.
Third, the business has to fit a life I actually want. Some of the best-looking deals I've ever seen required running operations in a city I didn't want to be in, or a schedule I didn't want to keep, or managing a workforce in a trade I had no patience for. Buying a business is not just a financial decision. It's a decision about how you spend the next five to ten years of your life. If the business doesn't fit that answer, the multiple doesn't matter.
Fourth, there has to be a clear reason to say yes. Not a clear reason to not say no. That's different. A lot of buyers close because they couldn't find a reason to walk. I close because I found a specific reason to move forward - a moat, a trend, a structural advantage, a seller relationship, something concrete that makes this deal better than the next ten I'll look at this quarter.
The result of all four filters is that I pass on a lot. And every time I pass, some part of me wonders if I'm being too picky. Then I look at the deals I didn't take, and I watch what happened to the buyers who did. About half of them worked out. About a quarter were fine but disappointing. About a quarter were disasters the buyer should have seen coming and couldn't because they were already emotionally committed.
Discipline is the whole game. The best buyers I know are quiet people who say no a lot and yes with conviction when it's time. The worst are the ones who are so afraid of missing the right deal that they close on the first deal that looks like it.
Pass more. It gets easier once you see what you're protecting yourself from.
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