The call came out of the blue. It was a group interested in buying the business. They needed information. Your company was a perfect fit. Just send us some details and we will be in touch.
Unsolicited interest can catch a business owner by surprise.
Mature owners who have created and built a business get interest out of the blue from an individual or another company. Amazingly, a normally reserved and careful businessperson ends up jumping through hoops, invests a lot of energy feeding the “interested party” with data, and then, to their disappointment, discovers the business is not a “good fit” for the interested party.
So, what’s the problem with this picture and why is it showing up more frequently. There are two major sources:
Both are entirely legitimate strategies. Both can work. And we have worked with both types of buyer groups. But we also have information packets for them prepared in advance and a process in place that treats interested parties equally, while serving as the intermediary to shield the owner from the inevitable questions.
Most owners are not prepared for this surprise and unsolicited process. It can lead to an interruption in normal processes. The owner can take his or her eyes off the business to find data needed by the interested party. The owner ends up unveiling details about their operations, their approach and sometimes even their customer identities. They overlook that confidential information is now in the hands of someone they barely know.
This is like hiking without a trail or compass. What happens if the possible sale never happens?
Owners we work with often have been down this road. Frustrated and disappointed, they wonder what to do next. They turn to us with the feeling they would be better off with a different approach. As experienced advisors, we know the best paths to consummating a transition plan:
Businesses represented by an experienced M&A advisor get all of these.
Our thorough process takes time to pull together, but includes all of the following:
We prepare a confidential information memorandum (CIM) which presents the opportunity represented in the selling enterprise. It includes a financial profile that will help a prospect see if it is a good fit. There often are details about customers without names. (That is reserved for diligence.)
Typically the sales process will involve a “controlled auction” where the M&A advisor actively seeks prospects, provides them all the same data and a schedule for acquisition proposals. Prospects analyze the information and develop pricing that makes sense for them. They will be asked to express their proposal in a Letter of Interest or Letter of Intent(LOI). The “auction” with its deadline for proposals, gives owners a chance to see what the market will bear for their entity.
The advisor will try to get multiple offers, and then review these with the owners and other trusted advisors. They will be able to consider what is best for them, and which of the options makes the most sense.
A good example of this can be found on the football field: team effort. Tony Dungy, an experienced professional football coach, observed that the most successful leaders are those who surround themselves with people whose strengths complement their weaknesses. That is what makes for a successful team.*
When it is time to consider transitioning your company, look for an advisor who can offer you support and assist in presenting the company story. Clearly you were smart enough to create an enterprise. You have the best chance to win when it comes to a transition by getting help from others who have done this before and who can offer strengths and experience for your once in a lifetime transfer.
*The Mentor Leader: Secrets to Building People and Teams That Win Consistently, 2010, Tony Dungee, p60
BTS News
Manufacturer Sold and New Owner Expands It
BTS served as advisor in the sale of PlasTech Machining Fabrication, Inc. to DelCam Holdings in 2020...the company has grown substantially, doubling employment and adding capacity to boost future prod
How M&A Will Respond to Next Recession
The takeaway for business owners: Get back to basics. Don’t worry about hyper growth. De-risk your company as much as possible.
Perception vs Reality with Small Businesses
Sometimes the economic picture on the news seems inconsistent with what is happening for many business owners. Nearly every owner we speak to is out straight.
NH-Based Techinical Manufacturing Company Sold
Hampshire Controls has a bright future with new ownership. The company was recently sold by Diane Rush, owner and president, to Pillar Imaging and its leader Dr. Michael Pilon.
Be Ready When You Are Ready
When a business owner says it’s time to sell, I ask, “How fast do you want to be out?” The answer I hear most is, “Yesterday.” But sellers underestimate how long the process takes.
Looking at a Sale Through the Right Lens
Sometimes our vision about the future is blurry because we aren’t considering the whole picture but only parts of it.
5 Deal Points from the Trenches
Today I work with clients of Business Transition Strategies who are implementing Growth Through Acquisition strategies. Here are a few observations from working on a wide variety of projects.
Tax Changes Could Hurt Net Proceeds
Changes proposed to the capital gains tax suggest they may need to get 30% more in a transaction in the future just to net the same value they would get today.
Good Ideas From Shark Tank Deal
One of my colleagues in Cornerstone Alliance was front and center in a recent Shark Tank exercise. A business that had been sold was put in front of four potential buyer groups.
Buyer Trends in Lower Mid-Market
Other businesses are a significant market for companies being sold within the lower mid-market.
Case Studies
Precision Machining Company
Initially, liquidation was a serious consideration. It would offer a quick exit but would hurt loyal employees and disrupt the customers who had come to rely on its quality production.
Green Product Company
Our client owners could dig in for the long haul…However, this would take five years or more. Owners simply lacked the horsepower to do it.
Water Purification Company and Young Buyers
Owners decided they wanted to retire. They also wanted to be fair to the staff who had been loyal to them. Could the company be sold, the staff retained and the facility remain in use?
Magnetics Company with High Profile Customers
(T)he manufacturer would need to focus on growing EBITDA to capture interest from major strategic buyers and achieve a higher multiple of earnings.