What Warren Buffett figured out about M&A that most sponsors never do
MAIN ISSUE
You're not losing deals on price. You're losing them on friction.
The situation most sponsors face:
You've found a great business. The owner is ready to have a conversation. You're excited. Then the process kicks in — and six months later, the deal is dead, the owner is exhausted, and you're starting over. Sound familiar?
Why the traditional process falls short:
The standard M&A playbook wasn't built for sellers. It was built to protect buyers.
Investment bankers. Data rooms. Dog-and-pony shows. Three rounds of diligence. Renegotiation after you've already shaken hands. The whole thing takes 8–12 months, and statistically, only 20% of deals that enter that process actually close.
The seller who was ready and willing in month one is burned out, resentful, and second-guessing everything by month ten. You didn't lose the deal on valuation. You lost it on friction.
The better approach:
Warren Buffett has bought over 65 companies, including multi-billion dollar acquisitions, using a two-page contract and a phone call. He pays below market. He won't visit the facility. He won't negotiate. And yet, business owners line up to sell to him.
Why? Because he makes it easy.
His entire process: the owner sends a short letter with key financials and an asking price. If Buffett likes it, he calls with an offer within a week. If they agree, he sends a simple contract — no legal jargon — and closes in 4–8 weeks. No renegotiation. No second-guessing. No drawn-out diligence spiral.
Three questions. That's really all you need: Do I trust this person? Are the numbers roughly what they claim? Are there any major hidden risks? If the answers are yes, yes, and no, you have enough to move.
As an Independent Sponsor, this is your single biggest competitive advantage over PE firms. You are not a fiduciary answering to an investment committee. You don't need to justify every judgment call with a binder full of documentation. You can move fast, build trust, and close, while the traditional buyers are still scheduling their management presentations.
The seller who is emotionally ready to exit will choose the path of least resistance almost every time. Be that path.
What you can do this week:
Audit your current process for unnecessary friction. Every step that exists to protect you at the expense of the seller's time and confidence is a step that could cost you the deal.
Write your own "Buffett letter" template. What are the three or four things you actually need to know to get comfortable? Build your process around those. Nothing more.
Lead with trust, not diligence. On your next intro call with a potential seller, spend the first half just listening to their story. Understand why they're selling and what they're afraid of. The numbers can come later.
The bottom line:
Sellers don't lose deals on price. They lose them on exhaustion. The Independent Sponsor who wins is the one who makes it feel less like a transaction and more like a handshake.
Have you lost a deal because the process dragged on too long? What would you do differently? Hit reply - I read everything.
See you next Thursday!
— Ahmad
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