Forty-one percent of mid-market letters of intent in the aviation services sector undergo a significant downward price adjustment-averaging twelve percent of total enterprise value-between the signing of the initial term sheet and the actual transfer of funds.
Standard deviations in mid-market LOI outcomes for the aviation services sector.
The number sits on the page with a cold, mathematical indifference, but the reality of it usually lands on a Tuesday morning in the eleventh week of a ninety-day exclusivity window. For Marcy Delacroix, the reality landed while she was sitting in her hangar office, a space that smelled perpetually of Jet-A and the ozone of an aging HVAC unit. She was looking at a framed photograph from , back when her ramp consisted of two Grumman Tigers and a single, dented fuel truck.
The $18.4 Million Handshake
She had built that operation into a three-site FBO network with a reputation for the fastest turns in the county. She had signed a Letter of Intent (LOI) for $18.4 million. She had already called her husband and told him the number. They had spent the weekend looking at a cabin near Lake Tahoe. She had mentally moved the money into an index fund and started thinking about what she would do on a Monday morning when there were no pilots complaining about the price of Prist.
Then the phone rang. It was the lead director from the private equity-backed consolidator that had been “courting” her for five months.
Marcy didn’t hang up. She looked at the back of a crumpled fuel receipt on her desk and wrote down the new number. She felt a sudden, sharp hollowness in her chest, not just because of the $2.6 million disappearance, but because she realized she was no longer in control of the room.
Microscopic Grit and Due Diligence
I spent most of this morning with a toothpick and a can of compressed air, digging coffee grounds out from under my keyboard. I’d knocked over a canister of French roast, and the grounds had migrated into the microscopic gaps between the keys. If you don’t get every single grain out, the ‘S’ key sticks. Then the ‘D’ key stops responding. The whole machine-this expensive, sophisticated tool of communication-becomes a vibrating paperweight because of a few ounces of misplaced grit.
Diligence is exactly like those coffee grounds. A buyer enters your business not to confirm how great it is, but to find the grit. They are looking for the one grain of data that justifies a “recalibration.” And by week eleven, they know they have you.
The fundamental trap of the FBO sale is the exclusivity period. When you sign that LOI, you agree to stop talking to every other potential suitor. You shut down your “data room” for everyone else. You stop taking calls from the other five buyers who were interested. You are now “under the hood” with one person.
The Captive Seller
In the beginning, the buyer is your best friend. They love your culture. They love your hangars. They love your line crew. But the moment exclusivity begins, the power dynamic shifts 180 degrees. You have gone from a sought-after asset in a competitive market to a captive seller in a monopoly.
Sophie C.-P., a veteran bankruptcy attorney who has seen more “distressed” deals than most people see sunsets, once told me over a very dry martini: “A signed paper is only as strong as the seller’s willingness to set it on fire and walk home in the rain.”
The problem is that by week eleven, very few FBO owners are willing to walk. They have already “spent” the money emotionally. They have told their staff that a transition is coming. They have allowed the buyer’s accountants to sit in their offices for thirty days. The friction of starting over-of going back to the market with the “taint” of a failed deal hanging over them-is too much to bear. The buyer knows this. The haircut isn’t an accident; it’s a strategy.
The Arithmetic of the “Haircut”
The most common lever used in these late-stage renegotiations is the “Net Working Capital” (NWC) peg. Most independent owners think of their business value as “Price + Cash in the Bank.” They assume they get to keep their accounts receivable and their fuel inventory. But the buyer views the business as a “going concern,” which means they expect a certain amount of “fuel in the tank” to stay with the business at no extra cost.
If the buyer can argue that your business requires $800,000 of working capital to operate, but your historical average is $1.2 million, they will try to “peg” the target at the higher number. Suddenly, you’re leaving $400,000 on the table that you thought was going into your pocket. It’s a sophisticated form of pickpocketing that happens in the footnotes of a 50-page spreadsheet.
Defending the Legacy
This is where the boutique advisory model proves its worth. An owner selling their business for the first time is playing a game where the opponent has played five hundred times this year. The consolidators have entire departments dedicated to “synergy realization,” which is often just code for “finding reasons to pay less than the headline price.”
The only way to combat this is to never let the competition die. This is why firms like
keep senior principals at the table through the entire duration of diligence, not just the initial handshake. If you have a representative who knows exactly how “fuel margin normalization” actually works in a Part 145 or a busy FBO environment, you can push back on the “grit” before it gums up the keys.
When the buyer says, “We found a discrepancy in your hangar lease escalations,” an experienced advisor can say, “We already disclosed that in the data room in month one; it’s already baked into the price.” Without that shield, the owner often just takes the hit because they don’t want to “jeopardize the deal.”
There is a psychological phenomenon called “deal fatigue.” By month four of a transaction, the seller is exhausted. They are tired of answering questions about why their utility bill spiked in July of . They are tired of providing tax returns from seven years ago. They just want it to be over.
The buyer, however, is a corporation. Corporations don’t get tired. They don’t have feelings. They have a mandate to maximize IRR (Internal Rate of Return). If they can shave $500,000 off the purchase price in the final week because the seller is too exhausted to fight, they have done their job.
I remember Marcy’s reaction when she finally closed that deal. She got her $15.8 million. It was still more money than she had ever seen in her life. But the joy was gone. The closing dinner felt like a wake. She realized that the “partnership” the buyer had promised during the honeymoon phase was just a mask for a transaction.
She told me later that she felt like she had been mugged in slow motion. The most frustrating part wasn’t the money; it was the realization that she had given up her leverage too early. She had stopped being the “boss” the moment she signed the LOI and went exclusive without a defender in her corner.
The lesson for any FBO owner nearing retirement is simple: The price on the LOI is the maximum you will ever receive, but it is rarely the minimum. The “real” price is discovered in the trenches of the QoE report. If you don’t have someone who can speak the language of the accountants-someone who can spot the difference between a legitimate finding and a “chipping” tactic-you are essentially walking into a blizzard in a t-shirt.
The Art of Walking Away
You have to be willing to walk away. You have to be willing to tell the buyer, “If you want the business for $15.8 million, go find another one, because this one is $18.4 million or I’m going back to the market.” But you can only say that if you haven’t already burned your bridges with the other bidders.
Maintaining a “shadow” competition, even during exclusivity, is a delicate art. It requires keeping the other potential buyers “warm” without violating the terms of your agreement. It requires a level of tactical maneuvering that most business owners, focused on the day-to-day operations of their flight line, simply don’t have the bandwidth to manage.
Selling a business is the most significant financial event of an owner’s life. It is the culmination of decades of 4:00 AM starts, hangar floor scrubbing, and navigating the Byzantine world of airport sponsor consents. To see that legacy eroded by a few spreadsheet formulas in the final weeks of a deal is more than a financial loss; it’s an insult to the work.
I finally got the last of those coffee grounds out of my keyboard. It took an hour and a lot of patience. My ‘S’ key works perfectly now. But I’ll never look at a canister of coffee the same way again. I’ll always see it as a potential mess waiting to happen.
Diligence is the same. It is a necessary mess. But if you have the right tools-and the right people-you can clean it up before it ruins the machine. You just have to remember that the handshake is the beginning of the fight, not the end of it. The wire transfer is the only thing that counts. Everything else is just talk, and talk is the cheapest thing in the hangar.