The Deal Nobody Else Saw

What happened

A buyer bid on several broker-listed businesses and lost each one to a higher bidder in a competitive process. So he stopped bidding and started writing directly to owners in his target industry who were not selling at all. One retiring owner was flattered to be asked and glad to avoid a public sale, and agreed to sell off-market. With no auction and no broker fee, the price came in roughly one turn of earnings below what the brokered deals had gone for.

The case, start to finish

“Bid higher until you win” converts a sourcing problem into a permanent handicap and calls it persistence.

Three losses in a row

An anonymized composite contrasting two ways of finding the same kind of business. No company is named because none is needed: the difference on display is a difference in process, and it shows up in the price.

The buyer started where almost everyone starts, on broker listings. Listings are easy to find, the financials arrive in a package, and the process has a shape to it. The buyer bid on several and lost every one to a higher bidder.

The fix that is not a fix

Sit inside that moment. Capital is ready. Months have gone. Three good businesses have gone to somebody else, each time by a margin that felt small. The obvious correction is to raise the number.

It is obvious and it is wrong, for structural rather than moral reasons. A listing exists to produce a competitive process, and a competitive process is built to find the buyer holding the highest estimate of value. Winning one means having been the most optimistic person in the room, which is the winner’s curse at small-business scale. On top of that, the multiple agreed at closing is the one input that never improves afterward: every operational gain in the years that follow has first to earn back the premium you volunteered at the start.

“Bid higher until you win” converts a sourcing problem into a permanent handicap and calls it persistence.

Writing to people who are not selling

The pivot was to approach owners in a target industry who had not listed and were not looking. That is slow work: letters, calls, most of them ignored, and no package of financials waiting at the end of any of it.

What it eventually produced was a retiring owner who was flattered to be asked and relieved at the idea of skipping a public sale. That second part carries more weight than it sounds like. A listing means competitors, employees, and customers learning the business is for sale, a parade of buyers through the operation, and months of uncertainty. An owner who is ready to stop will often trade some price for a quiet, certain transaction, and there was no broker in the room arguing otherwise.

Where the discount actually comes from

The deal closed at roughly one turn of EBITDA below what the brokered comparables had gone for, inside the documented range of about 0.5 to 1.5 turns. Two separate things produced it and it helps to keep them apart.

The first is the absence of an auction. With no rival bidder there is nothing to bid against, and the price stops being set by whoever wanted it most. The second is the broker fee, which on small deals runs roughly 8 to 12% and comes out of the transaction one way or another.

The costs sit on the other side of the ledger and this composite does not hide them. The financials were messy, because a business that was not preparing to sell has not been tidied for a buyer. Diligence took more work. And the sourcing itself is labor, paid in months of outreach that mostly goes nowhere.

Running both channels

For a smaller buyer the practical form of this is to run both rather than choosing. Broker listings give you volume, comparables, and an education in what things sell for. Direct outreach is where the discount lives, and it is available only to someone willing to do the unglamorous part.

What it will not do is guarantee a bargain. The discount is compensation for work and for messier information, not a free lunch, and plenty of direct approaches end with an owner who is simply not ready.

Timeline

• The brokered path Buyer bids on several broker-listed businesses, and loses each to higher bidders in competitive processes.
• The pivot Buyer starts direct outreach to owners in a target industry who aren't actively selling.
• The find A retiring owner, flattered to be approached and glad to avoid a public sale, agrees to sell off-market.
• The price With no auction and no broker fee, the buyer closes ~1× EBITDA below what the brokered deals had gone for.

You're in the owner's chair

You’ve lost three broker-listed deals in a row to higher bidders. Your capital is ready and your patience isn’t infinite. What do you do?

• Raise your max multiple so you stop losing
• Keep bidding on listings — eventually you’ll win one
• Start direct outreach to owners who aren’t selling

Business model

A solid, unglamorous business bought before it ever hit the market, which is the essence of proprietary deal flow.

Revenue model

N/A. The value is in the price: the same business costs materially less without competing bidders.

Cost structure

Direct sourcing is labor-intensive (outreach, relationship-building) and the financials were messy, but there was no broker fee and no bidding war.

Strategic challenge

Brokered listings are easy to find but competitive, bidding the price up; off-market deals are hard to find but cheap to win.

Key decision

Stop only bidding on listed deals and build proprietary flow: approach owners directly, before they list, where you're often the only buyer.

What worked

Direct outreach removed the auction; rapport with a retiring owner (who valued a quiet, certain sale) plus no broker fee produced a materially lower price.

What failed

The brokered attempts all failed on price, the very thing off-market sourcing fixed.

Risk factors

Off-market deals: messy financials, more diligence work, and the effort of finding owners who aren't selling. Brokered deals: competition and fees.

Lesson summary

Price is set by competition among buyers. Found off-market, before a listing and with no auction, a business commonly costs ~0.5–1.5× EBITDA less. Run both channels: brokers for volume, direct outreach for the bargains.

Key data

• ~0.5–1.5× EBITDA vs auctioned Off-market discount
• ~8–12% on small deals Broker fee avoided

Sources & basis

The business in this story is a stand-in, not a company you can look up. This case is an illustrative composite: the operator, the people and most of the dollar figures represent a pattern rather than reporting one firm's history. What the list below cites is the other half, the documented industry data and public reporting the composite was assembled from, including any real company whose published figures the case draws on by name. The mechanism and the arithmetic are real even where the business is not.

1. Proprietary vs auctioned deal-pricing data (~0.5–1.5× EBITDA)
2. Composite pattern: see the Off-Market Deals and Brokered Deals lessons