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.
The first thing a seller wants to verify is that a potential buyer has legitimate intentions and isn't just looking to gain proprietary information for a competitive edge. The fact that the buyer has retained a reputable M&A consultancy to act on its behalf says that the overture is a genuine expression of interest, not just a fishing expedition.
Then the buyer must quickly assess whether the potential buyer is someone worthy of moving forward with towards a sale. It can be every bit as tricky as a first date: if the buyer makes a bad first impression, or if the seller has a pre-existing bias against the buyer, the negativity can spoil the evening (or in this case, the possibility of ever reaching a deal).
These are some of the thoughts likely to be uppermost in the minds of the owners that you and your M&A advisor have identified as candidates for acquisition. Be sympathetic, but be careful. Your advisor is your best guide to walking a mile in the other guy's shoes through the swirl of facts and emotions that surrounds every strategic acquisition.
About New Direction Partners
New Direction Partners (NDP) is the print and graphic communications industry’s leading provider of advisory services for firms seeking growth and opportunity through mergers and acquisitions. NDP assists its clients by giving them expert guidance and peace of mind at every stage of the process of buying or selling a printing company. Services include representing selling shareholders; acquisition searches; valuation; capital formation and financing; and strategic planning. NDP’s partners have participated in more than 300 mergers and acquisitions since 1979. Collectively they possess over 200 years of industry experience with transactions in aggregate exceeding $2 billion.
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