Seeing It Your Way—and Theirs—In an M&A
If you've decided to grow your business by acquisition, it follows that you're thinking like a buyer. But, can you think like a seller as well?
You'll need to move nimbly from one mindset to another as you strategize the purchase that you want to make. Your own goals will be clear enough, but it will be harder to attain them if you can't also inject yourself into the thought process on the seller's end. This is the key to anticipating objections and devising solutions to problems that could arise as both parties search for the middle ground where the deal is waiting to be made.
What are your strategic considerations? Naturally, you want to be sure that you're making a rational acquisition in which revenue growth and profitability will be sustainable. You also have human capital to think about in the abilities of the personnel whom the acquisition will bring on board. There'll be a transition to manage as you blend operations and cultures after the deal has been finalized.
The seller's issues are different from yours. In the early stages, they're focused more on business basics than on long-term strategy. Most acquisition targets are not yet “on the market” and thus need to be properly qualified to determine if they are good candidates for strategic buyers. If they have not engaged professional M&A advisors to accurately assess value, they may not know what their companies are actually worth. Post-sale plans and wishes also must be clarified: for example, is the seller aiming for a short transition (six to 24 months) or continued employment with the buyer?
Reading a seller's mind is never easy. Many are reluctant to engage directly with potential buyers, especially those with whom they share market geographies. Fortunately, most potential sellers will provide necessary and confidential information to intermediaries working under non-disclosure agreements. There's added confidence for the seller in knowing that a breach of confidentiality on the intermediary's part is a reputation-killer that no conscientious M&A advisor would be guilty of.
Al Reijmer, partner at New Direction Partners, brings over 40 years of industry experience including various roles as a printing firm owner and as a supplier of printing presses. As a senior executive in two global press manufacturers, he utilized his hands-on production, finance and management experience to assist printing and packaging firms analyzing their equipment acquisition requirements through comprehensive investment analysis and ROI evaluations. Contact him at (610) 230-0635, ext. 707.