By Chris Vanderzyden. Originally published at ValueWalk.
So, you’re halfway through the M&A process and have received an indication of interest (IOI) or letter of intent (LOI). It’s now time to meet the buyers in person. This critical step affords you the ability to meet the person who could potentially assume your position and take over every aspect of your business. It also affords the buyer an opportunity to look under the hood, so to speak, and gather more information about your business to further assess if it makes sense to invest.
And that’s when you feel the panic set in.
Buyer’s meetings can be stressful. They’re sort of like a first date. You want your buyer to like you and believe in your business. The outcome of the meeting is either they give you an offer or they don’t; they ask you for a second date or they ghost you.
Tips To Get Your Buyer’s Meeting Right
You need to get it right. Here are a few key insights we use to prepare our clients and get rid of any jitters before a potential buyer walks through the door.
Know thy enemy, or in this case, your potential Prince or Princess Charming.
Get inside your buyer’s head. Before the meeting, begin the preparation process by understanding why the buyer is interested in purchasing your business. Spend time on their website and other outlets to research them.
Attention spans are short, and you’ll need to convey why your business is a good investment quickly and concisely. Understand your buyer’s why.
Prepare your presentation from a buyer’s perspective.
This is your chance to explain yourwhy. Why does your business do what it does? Provide a lay of the land as to why you’re successful, why your customers love you, and why there’s great potential for future growth with the involvement of the prospective buyer.
Know your numbers.
Think Shark Tankand present your future with projected numbers and supporting key performance indicators (KPIs). Your presentation should include data to support current revenue and the sustainability of future revenue with backlogs, contracts, recurring revenue data, and so on.
By showering the buyer with their potential ROI, you’re enticing them to become part of the future of your business.
Understand that the buyer will be assessing you and your key management team.
If you end up rolling equity in the deal, your buyer will be working closely with you. They’ll want to know that you’re someone they can work with to drive the business to a higher level. They’ll also want to know that a top-tier team is in place, and that the culture is a good match.
Your advisor will guide you in deciding which key team members to include in the meeting since their presence may be critical for the buyer to gain confidence.
Be prepared for an avalanche of questions.
A buyer may ask what you see as the biggest risks of your business or industry. They may ask about your competitors to assess your view of the business’s position. Or they may ask what you see as the benefit of working with them.
They’re assessing risks, and it will be your job to address their concerns and minimize any risks they see. But don’t lie. Be honest, because if you uncover a risk in the industry, the buyer will almost certainly have uncovered it, too. Any perceived increased risk will increase their ROI requirement and reduce the price they’re willing to pay you.
Answer loaded questions the right way.
“Why are you selling?” This is the question that can strike fear in a seller’s heart because they know it’s a loaded question. There’s a right way and a wrong way to let your buyer know why you’re exiting.
Saying with exasperation, “I’m burned out and my employees are driving me crazy!” is less than ideal, especially when the human capital in your business is what drives revenue. Better to say perhaps, “I loved building my business, but I’m ready for someone to take the reins and build on what I’ve been able to do.”
The buyer—whether a strategic, financial, or individual investor—will want to depend on you to help them transition into ownership. You, as the owner, are an important intangible asset for the buyer. They’ll want to know that you’ll be willing and able to help them grow the company for a while. This time could be a designated transition period or negotiable if you sell to a financial buyer who wants you to retain an equity position. The buyer certainly doesn’t want a leader who’s tired and disengaged.
Another detrimental response is: “I think we’re at the top of the mountain and have made all the money we can.” Entrepreneurs tend to focus on what they can do, and they want to sell when they’ve brought the business to its peak. Please remember that a buyer is looking for future growth potential, and they’ll contribute their resources to raise the summit to new heights.
If you say the business has reached its peak and there’s no more runway, the buyer may just walk away. A better statement would be: “I’ve driven the business as high as I can with my resources. But if the business were infused with additional financial and intellectual capital, it could grow enormously.”
Whatever your reason for wanting to sell, don’t unwittingly talk interested parties out of the deal. Turn it into a positive in the eyes of the buyer.
The Bottom Line
A buyer’s meeting is critical. With the right mergers and acquisitions advisory team to guide you, a perfect match and eternal wealthy bliss can be possible.
About the Author
Chris Vanderzyden, CPA, CVGA, CEPA, is an author, speaker, and leading educator on exit planning and mergers and acquisitions. She is a founding partner of Legacy Partners, LLLP, a mergers and acquisitions advisory firm dedicated to serving privately held middle-market business owners to create and execute successful exit strategies resulting in the harvesting and preservation of wealth. She’s the author of the bestselling book 7 Steps to Entrepreneurial Victory and Master Your Exit Plan: Sell Your Business, Preserve Your Legacy. Learn more at legacypartnersllp.com.
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