When we sold Voyager our peers ( companies of a similar size in the same sector ) could not understand why they had not been approached to sell ( what I call a low buyometer reading ) or could not find someone to sell them – with any great interest.
The fact was that the “ buying spree” in this sector ( the period when Telco’s and I.T. systems integrators were looking to purchase network systems integrators ) began in about 1998 with approximately £100 Million plus turnover companies ( eg Chernikeef and Decision Data ) and completely stopped in 2000 having reached £10 Million turnover companies ( and the dotcom bust !! ). There were a number of influencing factors and observations to be made during this period.
Put simply ( some ) M & A advisers – like supermodels – don’t get out of bed for less than a certain number ( turnover number and therefore fee earning number ). In many ways you cannot blame an astute M & A guy for starting at the top in a buying spree and working down. Any salesperson would go for the big deals if they can win them and handle them. As in most “ solutions sales “ you can spend as much time on the little deals as you can on the big ones and you ( may ) not get as much return. £10 Million turnover is a “ break point “ number from many perspectives.
As mentioned earlier there was an “industry cycle “ going on here related to the convergence, or at least perceived convergence, of voice,video and data. So, some of our peers failed to get noticed on two counts – they were too small ( below £10 Million ) and too late in the cycle to get onto the right people’s radar .
In addition we made the decision to go for a “ top-tier “ M & A adviser ( Ernst and Young ) which, it could be argued, was too expensive for us but which resulted in a very professional and global marketing campaign and at the end of the day a much higher sale price ( with a lot of our input ! ).
So, lets talk about the M & A Beauty Parade !! This is a very valuable and also quite fun part of the process. M & A advisers come in all sorts of shapes and sizes !! They range from Tier 1 companies like Deloittes down through mid-range advisers like Grant Thornton, to “ boutique M & A companies “ like Nortons and then one man bands.
Generally speaking you are looking for one that specialises in your turnover range. You might do as we did and look at advisers that are a rung or two above your range. So size, in relation to your company, is one factor in your decision about M & A partner.
Experience in your business sector is another factor. How many deals – on the buy side and the sell side – have they done ?? If they have done quite a few deals, over a period of time, then they will have a good contact database. If they know their stuff they will know what sort of companies buyers in the sector are looking for and they will be able to broadly classify you and match you to buyers fairly quickly.
Unless it is a one man band the adviser will send in a team to “ pitch “. If you are lucky ( ? ) you might see the Head of M & A accompanied by his team. They will obviously tend to field a good “ pitcher “ – someone who has many of a salesperson’s attributes. They will complement him with other junior members. Typically the head of the team will be expensive !! More junior, less well experienced people will be cheaper ( rates may not matter to you as you may get a team for a package price. )
What skills do the team have ??
Often M & A people have either a law or accountancy background. ( You are probably going to have separate lawyers but an ex-lawyer in an M & A team is pretty handy – even if it’s just to watch you are not getting ripped off by your lawyers !! ).
Recently we had an M & A team with an accountant who had become an experienced M & A person ( he was Head of M & A ). He was a good salesperson and also a good negotiator ( there will be times when you want the best of both ). We also had a lawyer who had been the buyer in an Internet buy and build operation and then became an M & A adviser. This was a lot of experience to have in two people.
You want their skills to complement and enhance your own skills. ( When you eventually decide on an adviser you will then form a new team with them ).
Of course the cost – or overall remuneration package – is also a factor.
In addition you want to be able to get on with and ideally be able to have a laugh with ( in some pretty serious situations ) these people.
Where do you find the right adviser ????
You will have company lawyers and accountants – they MAY be one of the options. ( Actually I have rarely used the same lawyers and accountants during the life of the business and for the sale of it ). Typically the Directors will have contacts in various M & A companies made over the years – maybe on the golf course !! You can research who is selling and buying companies in your sector. There are lists of who has done what deals and when.
When you have got your list of possible advisers together you invite them in, present to them and then let them present or more likely ask you more questions and respond with some initial thoughts. Remember that you are looking for a few things:
- Thier experience in your sector
- The ability and knowledge of their team
- Their initial ( ball park ) valuation
- Wether you can get on with them
- Thier global contacts
It is unlikely ( and probably preferable ) that all the answers are forthcoming at a first meeting and therefore a second round of presentations is normal. By this time they should have had time to research and to prepare thoroughly so that they can present to you.
In the second presentation you would expect them to give you more details on likely valuation, their charges, potential buyers, what’s happening in the sector, what your strengths and weaknesses are etc etc
From this you would produce a short list and then proceed to detailed discussions, heads of terms and contracts.
You may or may not employ lawyers at this stage but remember that the shape of the contract with your M & A adviser could be very important in terms of, for example, motivating them and the final fee that you pay.
Finally you will have your M & A adviser, new team members and probably drinking buddies !!
This blog post is a part of a series of posts describing The Sales Process – you can access the other parts of the series from the links below:
- Making the decision
- Alternative Options to an exit by trade sale
- Getting ready to sell
- Finding an M & A Adviser – The Beauty Parade !!
- Who/where are the buyers
- “The Teaser”
- Prioritising Interest
- The Sale Document – your greatest ever sales proposal
- Negotiations and Heads of Terms
- Due Diligence
- Closing the deal
- Objective Parties