M & A Rainmaker

Given the allowance for the prospective buyers to digest what has been presented and then present back to you, you want to see indicative offers.

You should make it absolutely clear that there is a deadline time and date for receipt of indicative offers.

People may come back with a whole range of reasons why they cannot make that deadline, some reasonable and valid and some not.

It does not matter to you – you have a process underway and timescales that you are working to and if people can’t make it then they can’t make it.

He who hesitates is lost !!

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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
  
• Timing
• 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
• Presentations
• Offers
• Negotiations and Heads of Terms
• Due Diligence
• Contracts
• Closing the deal
• Objective Parties

It may be possible to sell a business and walk away from it the day after completion but it depends on a number of factors e.g. How involved you are in the business – and it is often not possible to do so without considerably devaluing the business and reducing the price.

As we discussed earlier it is very important to have worked out very early in the process who wants to leave and who wants to stay and the purchaser will have stated quite clearly by now who they want to remain and for how long and who they don’t. This will depend on, for example, who they have and don’t have. They may not need your Financial Director or Sales and Marketing Director for example.

More than likely the key stages after Exchange of Contracts and any initial payments will be Completion Accounts, production of the Annual Accounts, first quarter numbers and then first and subsequent earn-out targets. This is where you have agreed stage payments for the business, after the initial purchase price and completion account payments, related to the performance of the business over a number of years.

It is possible that earn-outs are avoided but it is a great comfort factor  ( and therefore of value ) to the purchaser to know that he has key management personnel around for a couple of years.

One of the advantages for the business is that it has a very clear and well thought through business plan for the next few years( It is well thought through because it should be achievable ). This is always very powerful and gives clear direction to the whole company.

Often, as far as the employees are concerned, very little has changed ( and this may be a surprise to them ! ) except for a couple of the Directors and the fact that they are part of a bigger company.

Of course there can be circumstances where the acquirer wants to make more changes to the business. There certainly have been instances where acquirers have made changes that result in disruption, change and loss of jobs and sometimes, sadly and stupidly they end up destroying the value of the company.

However the whole point of going through this process is that you find the right purchaser and the right purchaser would have enough knowledge and experience to integrate an acquired business in a way that maintains and enhances it’s value and does not demoralise or destroy in any way one of it’s key assets – it’s people !!

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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
  
• Timing
• 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
• Presentations
• Offers
• Negotiations and Heads of Terms
• Due Diligence
• Contracts
• Closing the deal
• Objective Parties

As we have said although you might work on Heads of Terms with a couple of companies at some stage you are going to enter exclusivity with one and then proceed to agreeing the detail of the Sale and Purchase  Agreement ( SPA ) with them.

The detail of the SPA is not something that we will go into here but you and your advisers ( M & A and Legal ) will be involved in these discussions with the prospective purchasers advisers.

Depending on the particular scenario it is probable that the draft SPA will need to be reviewed by key shareholders and investors in the purchasers company and also any funders that they may be using i.e. banks, venture capital funds or private equity funds.

Hence you can see why this process may take some time as everyone involved checks that they are protected and getting what they should be getting.

The purchaser and their advisers may be negotiating with you and your advisers on the one hand and with their banks, shareholders and investors on the other. They will be very busy ! Remember – patience is a virtue !

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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
  
• Timing
• 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
• Presentations
• Offers
• Negotiations and Heads of Terms
• Due Diligence
• Contracts
• Closing the deal
• Objective Parties

The prospective buyer will, more than likely, want to look at your companies books and records in some detail. You are only going to give this valuable opportunity to those buyers who have provided an acceptable indicative offer and who you think you can work with.

Typically the M & A Adviser will establish what is known as a “ data room “ at their premises. This is a room or rooms where copies of all your key books and records are held.

You do not want prospective buyers walking all around your business premises at this stage – unsettling employees for what may be no reason. This is why you do the presentations and meetings off-site and why you also establish a data room offsite.

The prospective buyer and their advisers – usually, mainly accountants – are given access to the data room on agreed dates and at agreed times. This will enable them to verify that they key aspects of your business are as you have indicated in your Teaser, Sales Proposal and Presentations.

As this process progresses your Adviser will also be advancing discussions on the Heads of Terms agreement.
As things progress it is likely that the prospective purchaser is going to seek “ exclusivity “. This means that they are the company leading the race to purchase you at that time and you are only giving exclusivity to the company that you believe is the right one and is capable of following through on their offer.

This means that you and your adviser must do “ Due Diligence “ on the prospective purchaser. You want to know if their financial situation is as they say it is. Again, this is a very complex and often sensitive area. Often prospective purchasers are happy to trawl through your books and records asking ever more detailed questions but they are not so happy when you start doing the same to them ! You must do it though because a possible outcome is that you are “ bought “ by a company that cannot actually raise the money to complete or even bought by a company that subsequently goes bust. Make no mistake about it – this can happen and it is a legal, financial and emotional nightmare. Emotionally it is absolutely devastating to believe that you have sold your company to a solid company only to find out later that they are basically insolvent.

Typically sellers of businesses do want to get a good price for their business but they also want it to
“ go to a good home “. You will have many loyal employees, some of whom will have been there from the beginning of your business and you want them to be protected and happy as you hand over your business to someone else. Again, if you sell your business to someone who subsequently fails you will be unhappy for them aswell as yourself.

In all likelihood there will be a phase where you are juggling a small number of very serious prospective buyers who are all pushing for exclusivity while you are trying to get Heads of Terms and progress on the Sale and Purchase Agreement with the most suitable. Again, you need a very experienced M & A Adviser at this stage.

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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
  
• Timing
• 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
• Presentations
• Offers
• Negotiations and Heads of Terms
• Due Diligence
• Contracts
• Closing the deal
• Objective Parties

An M & A Adviser can say things to your potential future boss that you probably could say but probably don’t want to !! Remember this !!

Earlier on we mentioned that ideally your M & A Adviser should be a good salesperson and a good negotiator. They are laying out the key dates of the process to prospective buyers and cajoling and encouraging them to keep to the process. The threat of competition is, subtly, ever present. Not rammed down people’s throats but always there.

Your Adviser has a sensitive and complex role. It takes practise to manage multiple buyers ( perhaps with intelligent buying teams – perhaps not ! ) and you.

You do not want to be going through a learning curve in negotiating and handling multiple buyers whilst trying to achieve the best outcome for the sale of your business.  Although in general M.D.’s of companies are good salespeople and good negotiators that does not mean that they are good sellers of companies.

When the offers come in they will come in in a range of formats and a range of actual offers. An experienced M & A Adviser will help you analyse them and compare them. Again you will be amazed at the variations that come in. Potential buyers almost never value the opportunity in the same way and to the same value.

As discussions progress your M & A Adviser will seek a “ Heads of Terms Agreement “ from the potential buyer. This is a development on from the Indicative offer and a firm step towards the “ Sale and  Purchase Agreement “.

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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
  
• Timing
• 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
• Presentations
• Offers
• Negotiations and Heads of Terms
• Due Diligence
• Contracts
• Closing the deal
• Objective Parties

So the sales proposal has gone out to your list of prospects and has been followed up by your M & A Adviser who has discussed the opportunity and registered the response and level of interest.

The next stage is to invite in the companies that have expressed serious interest. You will present the opportunity to them on designated days with designated time slots. They will also be given the opportunity to present to you but as with the M & A Adviser Beauty Parade you may want to give them the opportunity to present back to you at a second designated date and time.

Remember this is very much a two way process, you are selling the opportunity to them but they are also selling themselves to you. ( they know that they are probably not the only potential buyer- because they know that you are running a process that will identify multiple potential buyers ).

The actual content of the presentation will be discussed elsewhere but it will include the key points highlighted previously in the sales proposal.

The M.D. will typically lead the presentations and probably the only people attending from your company at this stage will be the M.D. and the F.D. The M & A Advisers will also attend but take a backseat role.

From the prospective purchaser you would expect to see the key decision makers attending – ideally all of them. Again the fact that they know that they are in a competition usually makes them field their best team. If they don’t then you may question their commitment.

These presentations are a really great opportunity for the prospective purchasers team and you to get to know one another. Remember people buy ( companies ) from people. Relationships made at this stage will likely determine the outcome of the process.

Either at this presentation or a second one you will want to see indicative offers from the buyer.

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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
  
• Timing
• 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
• Presentations
• Offers
• Negotiations and Heads of Terms
• Due Diligence
• Contracts
• Closing the deal
• Objective Parties

The finished sales proposals that I have been involved in ( if I may say so ) are works of art !! The sales proposal for your business is probably the greatest ever sales proposal that you will work on.

Again, we will go into the detailed layout of a sales proposal elsewhere. However the sales proposal will follow the rules of all good sales proposals – not to be too long, keep it simple, minimum jargon, say what needs to be said and no more, use pictures and diagrams to enhance the words and because “a picture tells a thousand words “. Normally I would always recommend “ tailored “ sales proposals but at this stage it is impossible to tailor your proposal to every prospective buyer. Later on though, when you understand more about them you CAN tailor your presentation to them.

It will cover the financial background and future. It will describe the strategy and essence of the company, the products and services that it offers, the potential growth opportunities, the people involved and more.

Remember that this document may be read by non-financial and non-technical people in the first instance. They may have experience in these fields but now they are probably busy business strategists and entrepreuners. If they think that a business is “ the right strategic fit “ everything else will follow.

They will probably involve their “ specialists “ though – the F.D. for a financial analysis, the Sales and Marketing Director for confirmation of the sales enhancement, the Technical Director for a technical overview.

At the end of the day when it comes to a decision on whether to purchase or not although Boards are heavily influenced by their M.D.’s and Chairmen they will want ( and maybe need ) the buy-in and support of other Directors and Shareholders.

So, you see that this sales proposal is going to be read by a lot of very experienced business people. Let me mention something here – a spin-off of selling the company and marketing it is that you have an opportunity to develop new customers for your business even if they don’t buy it !! At the very least you can get them to say “ Well, I did not know what that company did in any detail but I do now and it’s a really great company with a really great team “. From a business development perspective you are not scrabbling around trying to find the right contact to listen to your ( usual ) sales pitch – you have just got your message to all the key people of a wide range of potential partners. Yes, you will be telling some of your competitors your innermost secrets but, if you have a good business, it’s more likely to unnerve them than help them.

Whilst we are on this subject there are probably a few people – may be “ co-opetition “ ( competitors that you co-operate with sometimes ) or key customers that could be competitors – that you would not send out the sales proposal and Teaser to. These people tend to come out as you go through the potential buyers list.

The Sales Proposal is likely to have been put together, as with the Teaser, by the M.D., F.D. and the M & A advisor. It will, no doubt , have also been passed around to the other Directors and maybe key shareholders for their comments and input.

The Sales Proposal is normally only released to interested parties that have signed a Non-Disclosure Agreement ( NDA ). This is a barrier to them talking to other people about you and the information in your Sales Proposal. Professional people are mostly pretty discreet ( they never know when they might be next ! ). You always get some unprofessional people with loose tongues.

The Sales Proposal will typically outline a set of timescales for the response by interested parties, presentations and the registering of expressions of interest and actual offers.

The M & A advisor will typically follow up the sales proposal and look to identify those that want to attend the presentations and make an offer.

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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
  
• Timing
• 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
• Presentations
• Offers
• Negotiations and Heads of Terms
• Due Diligence
• Contracts
• Closing the deal
• Objective Parties

Put bluntly you do not have time for “ tyre kickers “, competitors who “ just want a look “ or any other time wasters. You want to spend your time with seriously interested people and only with seriously interested people. Experienced M & A people, like experienced car salespeople, know how to weed out the “ tyre kickers “ from the serious punters.

Obviously there may need to be some clarification of The Teaser, some questions answered and some selling of the company but then it is largely Qualify, Qualify and Qualify again.

Is it a good fit for them ? Why is it a good fit for them ? Are they in buying mode ? Do they have an acquisition war chest ? Can they raise money quickly ? How ? Who will make the decision ? ( Is there a long decision making process, loads of shareholders etc ) Who would come to the presentation ? Have they got the time for this ?

When you have ticks in most of the boxes you can start considering the a “ hot prospect “. Then you can start to re-order your database with hot prospects at the top and those less so further down.

Typically the people most appropriate and most interested rise to the top.

Thos that you decide have serious intent will be the ones that will receive the full sales proposal.

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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
  
• Timing
• 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
• Presentations
• Offers
• Negotiations and Heads of Terms
• Due Diligence
• Contracts
• Closing the deal
• Objective Parties

Everyone is so busy these days and catching the attention of the Managing Director or Financial Director of a potential acquirer is not easy. You must make it as easy as possible. Creating the potential buyers list is a big step forward – the companies on this list are not random they are highly likely to be interested in a company like yours. You will also work out who, in those companies, deals with potential acquisitions. ( Sometimes it is the M.D., sometimes the F.D., perhaps an M & A or Acquisitions Director. It may be the Chairman or the Marketing or Business Development/Strategy Director. ) You need to know precisely who.

The Teaser is a one to four A$ side document at most. When it lands on a person’s desk they will look at it and be able to gain a relatively rapid view of the company that is for sale. They should be able to see the opportunity for them ( because you could see it ) It is a clear, quality, easy to read document with a number of key sections in it. ( To be discussed further elsewhere ).

It is likely to have been put together by a combination of the M.D., F.D. and the M & A adviser, with input from the other Directors e.g. Sales, Marketing,HR etc.

It is going to include key selling points, a financial overview, market background, team overview, and the reason for selling.

It will also outline the sale timescales and deadlines. It is very important for people to know that there is a process in place which will result in the company being sold. If they are interested they need to allocate time and resource to a response or the opportunity will be gone ( If you snooze you lose !! ).

The Teaser will be mailed out to the target list and then followed up by telephone a short while after when interest will be registered on the prospect list.

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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
  
• Timing
• 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
• Presentations
• Offers
• Negotiations and Heads of Terms
• Due Diligence
• Contracts
• Closing the deal
• Objective Parties

The buyer that emerged from the list when we sold Voyager came from the U.S. Recently, when we marketed 5i Limited we spoke to companies in the U.S., Europe, India and the Middle East although the final buyer was from the U.K.

You should think globally and consider wether there are buyers abroad. Contacting people abroad is now relatively easy in this Internet age. Social and business network connections may assist. Often M & A companies have “ partner” companies in other countries.

One of the first tasks is to sit down with your chosen M & A adviser and create lists of possible purchasers. These will include competitors ( especially those that are known to be on a buy and build strategy – consolidators ), complementary companies ( e.g. for Voyager and 5i – Telco’s, System’s Integrators and Internet Service providers – diversifiers ) and converging companies ( companies that see industries converging and want to combine skills – convergers ). Initially my advice is to cast the net wide and then refine it down later.

When you have a list you want to rank them by various criteria. In so doing you want to “ qualify “ companies. Are you a good fit for them ? ( at least from where you sit ). Are they in acquisition mode ? Do they have money or do they look like they could raise money ? ( Basically are THEY a good business with good people ? ).

Is the timing right for them ? ( You will often find that, for some reason e.g. they are just completing another acquisition or the Managing Director has just changed, they are just not “ in the zone” for acquiring. )

You will add details to your list – contacts, decision makers, email addresses, phone numbers etc etc

You will discuss these lists adding and taking away people as you go.

This list is going to be the basis for the mailing out of your “ Teaser “. It will be a living thing until you get into detailed negotiations with your chosen acquirer.

With such a list you will hopefully cover all the possible people that might be interested in your business and then create competition between the most interested parties.

This is what you want – competition and choice for yourself.

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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
  
• Timing
• 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
• Presentations
• Offers
• Negotiations and Heads of Terms
• Due Diligence
• Contracts
• Closing the deal
• Objective Parties