We have packaged the company, marketed it, screened potential buyers, received a number of offers and conducted conference calls. Our M&A process is designed to allow the business owner / seller to able to continue running his business while we manage the flow of potential buyers. But we can only do so much. Now its time for the critical buyer / seller meetings.
We spent a week in a small town conducting management meetings with potential buyers. Usually it doesn’t take an entire week, but traveling to this small town wasn’t that easy, so we had to be flexible and allow potential buyers enough time to visit with the company. I think everyone is a little apprehensive before a visit. The seller certainly is, as this is something that typically happens once in a lifetime and every step in the process can produce some anxiety. I’m a little anxious because to this point I’ve been a match-maker representing the seller, so I hope I’ve done a good job and that the buyers and seller will get along. The potential buyers at this point have put in a lot of time and effort, so they are likely a little anxious that they can make a good enough impression so that they end up with the business.
By the end of the week we knew that the visits went well. Two of the buyers mysteriously seem to have switched personalities on the plane trip out, but not in a negative way – just in an interesting way.
So what goes on in a meeting? Well, it depends on the type of buyer (strategic or private equity PEGs) and what the immediate concern of the buyer is, but they typically go like this:
- How’s the weather, the trip and your kids.
- The buyer usually goes first, and provides an introduction of their firm. Sometimes strategics don’t understand the value of selling themselves, but PEGs do and will typically spend some time differentiating themselves from other PEGs. For my part, I listen and make sure that a few key points get brought up. With PEGs I’ll make sure they address their source of funds, investment timeline, type of companies they invest in, etc. By this time I already know the answer, but I’ll ask anyway so that they will discuss it in front of the seller. (I already know the answer because by this stage in the game I don’t want the buyer’s answer to be, “Well, I don’t have a dedicated fund or really any money at all. I’m hoping to get a term sheet signed and then I’ll shop that around to hopefully raise money. I’ll then be the CEO of the company because this is the only way I can get a job”.)
- I like the seller at this point to do a presentation, one they may do for a potential customer. Prior to this a buyer may be focusing on financials or other hot-spots, but at this point buyers are trying to understand the full range of products, services and what makes the company special.
- The visit usually then drops into what the buyer is concerned about. For a PEG it may be market size, growth opportunities or competition (In other words, can they really grow it and sell it?). For a strategic it may be manufacturability and how the two sales forces can work together (In other words, are those strategic synergies really there?).
- There are usually some additional information requests that come out of the meetings, and we note these. Sometimes critical issues come up, like the accounting numbers don’t actually add up (it happens). Then we scramble to figure it out.
It is obvious during the entire visit that the two parties are sizing each other up. The buyers are asking questions I’ve heard them ask before. They don’t care so much about the answer, they just want to hear how the seller explains it. I can tell the seller is bouncing between the monetary aspects (will I get enough?) and questions they have about employees and how the acquisition may benefit the company’s ability to sustain itself and grow.
Come to think of it, I’ve never (knock on wood) had a buyer/seller meeting turn ugly.
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