A founder's guide to selling a distressed business

Most M&A guides assume you're selling a healthy, profitable business on your own terms. The reality is that many business sales happen under duress: lender pressure, investor pressure, exhaustion, or financial strain. This guide is for founders navigating the harder path.

First: understand your actual options

When a business is in distress, it can feel like you have no options. That's rarely true. Before you accept the first offer or give up, understand the full landscape:

Wind down. Sometimes the right answer is to close the business, pay creditors what you can, and move on. This is a legitimate outcome, not a failure.

Restructure in place. If the business has real revenue but the wrong capital structure, a restructuring with existing lenders or investors may be possible without a sale.

Controlled sale. A voluntary, controlled sale process gives you time, confidentiality, and leverage. This is usually far better than a forced sale or a bankruptcy process.

Distressed sale. If you're past the point of restructuring in place and need to move quickly, a distressed sale to a buyer who understands complicated situations is often the best outcome available.

Chapter 11. In some cases, a bankruptcy process provides protection to run a proper sale. This is a legitimate tool, though it comes with significant costs and public visibility.

Finding the right buyer for a distressed situation

Most strategic buyers and traditional PE firms don't have the appetite or experience to navigate distressed acquisitions. The process is harder, the due diligence is messier, and the deal mechanics are more complex. These buyers often get excited, sign an LOI, and then disappear during diligence when things get complicated.

The buyers who are actually good at distressed acquisitions have specific characteristics:

• They've done it before — ask for specific examples
• They engage directly with lenders and understand workout mechanics
• They move fast, because time matters in distressed situations
• They pay attention to the people, not just the assets — they understand that the team is often the most valuable thing in a struggling business

What buyers look for in distressed situations

A distressed acquisition buyer isn't looking for a perfect business. They're looking for a business with real underlying value that's in trouble for reasons that are solvable. The specific factors they care about:

Real customers who still need what the business provides. Revenue is revenue. If the product or service is genuinely useful and customers are paying for it, there's a business to save.

A team that wants to stay. The worst outcome in a distressed situation is when the best people leave before a sale closes. Buyers who know what they're doing will want to talk to the team and understand retention risks early.

A clear explanation of what went wrong. Buyers of distressed businesses aren't naive — they know something went wrong. What they need to understand is why. Was it a capital structure problem? A market timing problem? A specific operational mistake that's already been identified and addressed? They can work with honest explanations. They can't work with founders who can't explain their own situation.

A realistic path to stability. Not a path to explosive growth — just a path to a business that covers its costs and serves its customers without constant crisis management.

How to approach lenders

If your business has lender complications — covenant breaches, forbearance agreements, lender workout conversations — those conversations need to happen before or in parallel with a sale process, not after.

A buyer who's serious about a distressed acquisition will want to engage with your lenders directly. Give them permission to do this early. Lenders who have been avoiding a conversation often become much more cooperative when a credible buyer appears.

Be transparent with your lender about the sale process. Surprises are the enemy. A lender who feels ambushed by a sale closing will create problems. A lender who's been kept informed and who sees a buyer they respect is much more likely to cooperate.

What to tell your team

One of the hardest parts of a distressed situation is managing the team through it. People are scared. Rumors fill the vacuum left by silence.

The best practice is to be honest without being specific. Tell your team that the business is in a difficult period and that you're working hard to find a path forward. If you're in a sale process, you don't need to disclose that specifically — but don't actively deceive your team about the seriousness of the situation. They'll find out, and the trust damage from being misled is worse than the discomfort of the honest version.

When a buyer is identified and a deal is moving forward, work with the buyer on a communication plan. The best buyers in distressed situations are experienced at managing this transition and will have a clear message ready for the team at close.

A note on speed

Distressed situations have a half-life. Every week that passes without resolution is a week when your best people are quietly calling recruiters, when customers are sensing the instability, and when your options narrow. Move faster than feels comfortable. A good enough deal that closes in thirty days is usually better than a perfect deal that takes six months.

At Enduring Ventures, we've acquired multiple businesses in difficult situations. We know how to move fast, engage with lenders, and keep teams together through a complicated close. If you're in a distressed situation and want to explore options, reach out at deals@enduringventures.co.