Small Business Acquisition - Negotiation Red Flag?
Looking for some opinions from the masses here.
I am currently in the process of acquiring a small business in my neighborhood (USA). Its a small IT/MSP and PC Repair shop. I have done due diligence, reviewed 4 years of P&Ls, tax returns (with accountant), bank statements etc. Its profitable, has shown steady growth YoY, its been in business for 20 years in this neighborhood and has fantastic reviews on google and yelp. If anything, it makes more money than it shows. I cant verify all of the SDE, but my accountant and I suspect a decent amount of personal expenses in the "COGS" line given the type of work they focus on and that they only ever report COGS as one big spend and no details.
My issue is the negotiation. I tend to be a very principled person, to the point where its a detriment to myself. I mention this because I need some grounding on if I am being too principled or if this is a true red flag I should walk way from.
The negotiation: We started out with an offer of 1.5x SDE, they countered back with about 1.75.
While emailing back and forth on the price, we were also trying to work on an in person meeting. I spent a few hours with the sellers, we walked through sales intake, fixed some laptops, did a data transfer for a customer, etc. Customers were coming in and out for an hour and it was slow for an hour seemed like a typical small business. I had some great discussion with the seller, but what caught me off guard is he reopened the negotiation randomly. At the time he tried to get me to come up in my price. This wasn't supposed to be a negotiation, more of an operational tour. I was caught off guard, but he said he had another offer on the table, he would rather sell to me as this other place was a small local "corporate" outfit, but he needed me to come up to asking. I said hey I wish I could give you all the money in the world, but I have what I have and I joked that i could check the couches for more money. We ended the meeting and other than that it felt really good.
The sellers then went on vacation for a couple of weeks and we agreed to touch base when they returned. I sent out an email the day before their return to check in and let the broker know that I liked the place and that I would come up to 1.75x SDE (we left the negotiation at 1.5 v 1.75, not including the talk I had with seller).
This is what frustrates me, she comes back and says the owner is firm at asking price. He said he told you he was firm. The broker and I were on the phone, so the other offer also got brought up and she goes "we dont have any other offers". This made my eye twitch lol. The last price we left on officially was the counter at 1.75.
I dont want to let my principals or ego get in the way, but this feels like a red flag. If I look purely at the financials and reputation, what they are asking DOES seem fair. This is also my dream, to own my own small business, especially in my community. But him lying about the other offer and fudging our conversation feels like a red flag to me. Or is it just my ego getting in the way?
Is this a red flag enough to kill the deal? Or is the seller just a little unprofessional and I shouldn't be as bothered as I am? Or am I the one missing something and being unprofessional for that matter?
Thoughts?