Nick Wheeler·August 10, 2023

Postmortem of a Broken Deal | Nick Wheeler Interview

Nick Wheeler is a former Army officer and Green Beret who attended HBS and launched a self-funded search in the greater Washington, DC area. This episode is a real-time postmortem of a deal that collapsed just weeks before closing — a commercial landscaping company with ~30 years of history, roughly $1m-$1.5m in annual EBITDA, a strong government contract customer base, and significant operational upside from modernization. Nick found the deal through a broker referral from fellow searcher Steve Ressler, and after an initial LOI rejection, saved the deal with a pivotal dinner where he built rapport with the seller's wife. The deal unraveled over several months due to a persistent working capital dispute (~$150-200K on a ~$4m deal), the seller note mechanics, and ultimately the seller's wife — a 50% co-owner who worked only ~3 hours per week — deciding she was not ready to sell. Nick spent ~$7K and several months in diligence before the deal died the week it was supposed to close. Key lessons include: understand the full seller-spouse dynamic early, don't rely on brokers to communicate key deal terms, have working capital conversations as soon as data allows, and always keep the deal pipeline open. Nick remained resilient, crediting his military background and prior conversations with other searchers who normalized broken deals as part of the process.

Deal facts

purchase price: ~$4m
multiple: ~4x EBITDA (3-year average); ~3.4x on 2022
sde ebitda: ~$1m EBITDA (avg last several years; range $1m-$1.5m; 2022 adjusted EBITDA ~$1.3m)
financing structure: SBA loan + ~25% seller note; deal did not close
notes: Deal fell apart during diligence, approximately closing week. Nick spent ~$7K out of pocket (primarily QoE fees, no legal docs started). Working capital dispute of ~$150-200K was a major sticking point. Cash at close would have been ~$2.8-$2.9m with additional ~$1m off balance sheet.

Why this business

Nick liked the stability and visibility of recurring revenue from long-term government contracts, the high customer retention, and the mix of maintenance-to-construction revenue (only 15-20% construction). He was drawn to operationally intensive blue-collar service businesses and saw significant value-creation potential in a pen-and-paper business with no website, no pricing strategy, and no ERP — the kind of antiquated-but-profitable operation where a search fund operator could modernize and improve margins. The business had been around over 30 years and had ~200 commercial customers plus large government clients.

What's working

Long-term government contracts providing sticky, predictable recurring revenue
High customer retention and strong maintenance-to-construction ratio (80-85% maintenance)
Identified significant operational upside: no website, no pricing strategy, unprofitable routes not identified, no ERP for scheduling/bidding — all areas a searcher could improve
Nick built strong personal rapport with the seller-husband, who gave him direct system access and expressed confidence in Nick running the business
Nick kept his deal pipeline open during diligence, which helped him emotionally and practically when the deal fell through

What's hard

The seller's wife (50% co-owner, minimal operational involvement) was never truly comfortable with selling and was the primary reason the deal collapsed
Working capital was a persistent sticking point — seasonal landscaping business complicated the calculation, and construction work was tracked outside QuickBooks, making the true working capital need harder to quantify
Broker did not adequately walk sellers through key deal terms (seller note mechanics, working capital rationale), requiring Nick to have difficult conversations directly
Data gathering from unsophisticated sellers was extremely difficult — tax returns delivered as boxes of printed paper, no digital data room capabilities
The business had a prior broken deal with a PE buyer, which Nick initially saw as a motivated-seller signal but which may have reflected a seller not truly ready to exit
Nick's assessment: the seller's lifestyle (wife working ~3 hours/week, earning $1m-$1.5m SDE) meant the net proceeds (~$3m-$4m) likely wouldn't support their retirement lifestyle without significant adjustment
Going direct with the seller too often — bypassing the broker on difficult conversations — removed a potential buffer for negotiating sensitive topics
Diligence cost ~$7K and significant time, including reaching out to ~12 landscaping searcher-operators and building a full SIM the night before the deal fell apart

Notable quotes

I think that's probably the only analogy that would resonate with people is it's probably like going on a first date. You're a little nervous and maybe there's certain information you want to get but you don't want to be too direct and asking for it.

She just was not — I don't think she ever will be ready to sell and go through that process. She really enjoyed the lifestyle of working what was about three hours a week in this business and making SDE of a million to a million-five some years.

I gave myself 24 hours to feel sorry for myself and discouraged but you got to move on quickly when these things happen.

In his data that he tracks, about a third of closed deals come from phoenix sellers as he refers to — sellers that rise from the ashes. So there's a chance this one comes back.