LOI: The Letter and the Spirit
2. Make your numbers. At the risk of stating the obvious, you'll still have a business to run and projections to meet after you sign the ROI. If you miss a forecast, you may be confident that sales and profits will bounce back, but the buyer probably will not share your optimism. Failure to make numbers injects uncertainty and ranks among the top deal-killers in M&As. Stay focused on hitting all of your business targets!
3. Respond to due diligence requests on a timely basis. Speaking of deal-killers, we have seen tardiness on the seller's part undermine more than one otherwise promising M&A. Expect a continuous stream of requests for information from the buyer while due diligence moves forward. Responding to them ASAP will go a long way toward getting the deal done.
4. Develop a communication plan. M&A negotiations should proceed in confidence, but some stakeholders must be brought into the loop at the right moments to protect the integrity of the deal. This applies in particular to your customers, whose loyalty is the asset your buyer values the most highly. Your communication plan should specify who will be told, when, and what steps will be taken to assure key accounts that there will be no interruption in service during the transition of ownership. Depending on how it is handled, communication is a make-or-break element of M&As.
5. Think about and plan for life after ownership. This is what my New Direction Partners colleague Peter Schaefer calls taking “An Emotional Walk on the Beach.” For the seller, an M&A isn't just a business transaction—it's a resetting of personal expectations and, often, the embrace of a new set of personal goals. Will you remain active in the industry? If the buyer wants you to stay on in a post-sale management role to help make the transaction a success, will you be comfortable playing the ex-boss working for a new one? Many owners are entrepreneurs whose entire adult lives have been defined by building the businesses they are putting up for sale. Life after ownership can be just as rewarding in its own way—if you begin charting your course now.