top of page

How Business Sellers Scam Buyers?

Published on February 21, 2023

Nothing hits harder than hearing about someone that has a dream and while pursuing that dream gets everything taken from them. Unfortunately, this happens, in fact, it probably happens in one way or another, more than most people would believe. Sellers can scam business buyers in various ways and these scams can be difficult to detect; ever wonder why you hear about a due diligence period dragging on and taking months or hearing about these public companies only finding out about fake user accounts months after the transaction is complete? The seller may appear legitimate and professional, but are they? It's important for business buyers to be aware of these scams and to take steps to protect themselves and their companies.

Some of these include:

  • Misrepresenting the Financial Performance of the Business: The seller may overstate revenue, understate expenses, or manipulate accounting records to make the business appear more profitable than it actually is. Connecting directly to Shopify accounts, QuickBooks and real time analytics helps, but there is so much that happens in the movement of money that looking at just a few screens is not enough.

  • Hiding Debts, Lawsuits, or Other Liabilities: The seller may conceal information about debts, lawsuits, or other liabilities that could impact the value of the business. For example, they may not disclose a lawsuit that is pending against the company or conceal a large debt that the business is unable to pay. There is also the issue of past employees or contract workers. Was everyone documented correctly, did the contracts state who owns what?

  • Overstating the Value of Inventory: The seller may manipulate inventory records or overstate the value of inventory to inflate the overall value of the business. This can be especially difficult for the buyer to detect if the business has poor inventory management processes in place.

  • Transferring Assets Prior to the Sale: The seller may transfer valuable assets out of the business prior to the sale in an attempt to reduce the value of the business being sold. This could include transferring valuable equipment, intellectual property, or even key employees to another entity.

  • Using Intermediaries to Conceal their Identity: The seller may use intermediaries, such as lawyers or brokers, to conceal their identity and make it more difficult for the buyer to perform due diligence. (Have you ever been on one of these business for sale websites and the person never wants to use zoom or they won’t meet in person and their linkedin account seems odd?) This can make it more challenging for the buyer to identify the true ownership structure of the business and assess potential risks.

  • Creating Fake Customer or Vendor Contracts: This one has been in the news for lately with acquisitions done by several publicly traded companies and if they, even with all their professions looking into matters get scammed, don’t you think it's possible with any size of business? Simply, the seller may create fake customers to make the business appear more attractive to the buyer. This could include creating false invoices or other documentation to support the existence of these contracts.

  • Selling a Franchise that Doesn’t Exist or Is Unregistered: The seller may sell a franchise that doesn’t exist or is unregistered, which could lead to legal problems for the buyer down the road. In addition, the buyer may be misled into thinking that they are buying a successful business model when in fact the franchisor has no track record of success.

  • Selling a Business that is in Bankruptcy: The seller may sell a business that is in bankruptcy, which could result in the buyer assuming significant liabilities and potentially losing their investment. One conversation that I just recently heard was of a disgruntled early employee of a tech company trying to sell off assets of a company that was in bankruptcy on his own on the side…The justification was that he was an early employee and since his options were now useless, he believed he was still owed that money from the company and this was how he was going to get it. (if anyone knows this or have heard of a similar instance, please comment in the comment sections as I’m sure people would be interested to hear)

  • Collecting Payment and then Failing to Transfer Ownership or Assets of the Business: The seller may collect payment for the sale of the business and then fail to transfer ownership or assets of the business, which could result in the buyer losing their investment. This can be especially challenging to detect if the seller is using intermediaries to conceal their identity. ( has some articles on using escrow and other suggestions for how sellers can protect themselves when transferring assets in a business)

In conclusion, it is crucial for buyers to thoroughly research the business and its financial records and get professional help in the process when buying a business.

*** The content is not intended to provide legal, financial or M&A advice. It is for information purposes only, and any links provided are for your convenience. Please seek the services of an M&A professional(s) before entering into any M&A transaction. ***

For More Information


Shawn Flynn is a Principal at Global Capital Markets, a premier middle-market investment bank with a global presence. Shawn has expertise in mergers and acquisitions, capital markets, financial restructuring, and secondaries. He speaks Mandarin and is the host of the award-winning Podcast The Silicon Valley Podcast. Connect with him on LinkedIn.

Shawn Flynn, Principal

Tel (415) 578-1445 Ext. 4

About Global Capital


As a middle market investment banking boutique, Global Capital provides mergers and acquisition advisory services, access to corporate debt and equity capital, and strategic advisory services to successful middle market companies. For over twenty five years, our team has offered companies a unique blend of sophisticated financial expertise and access to the global marketplace of buyers, sellers and financiers.

Catalysts for Corporate Finance Worldwide ©2023 Global Capital Markets, Inc. All Rights Reserved.

Securities offered through GCMI Securities Corp., member FINRA and SIPC, and a subsidiary of Global Capital Markets. Please reference GCMI Securities Corp. and its team at


bottom of page