Price is often the number one focus in mergers and acquisitions and everyone is eager to get down to the numbers.

However, as you might expect, buyers and sellers have very different expectations on price, which can lead to friction between the two parties. On the one hand, most sellers plan to offer their business to the highest bidder while buyers are looking for a cheap deal. Given the opposite viewpoints, it can be difficult to broach the issue of price and come to an agreement.

The best way to bridge this gap is to make sure you don’t focus on price as a primary driver for the acquisition. Before you even begin talking about dollars and cents, you should make sure the deal makes sense. Initially you should communicate the strategic value of why an acquisition between your two companies makes sense. This is a critical step, especially when approaching owners of not-for-sale companies. Aligning your vision with the owner’s vision prior to even discussion the details of a potential deal (such as price or deal structure) is paramount.

Once you’ve achieved strategic alignment and you begin negotiations, you must think about what you can offer an owner in addition to price that will convince him or her to sell to you. Money is a strong motivator, but it’s not the only motivator. As a buyer, you must identify the nonfinancial factors in addition to price that will motivate an owner to sell. Understanding the owner’s psychology is key to building a mutually beneficial deal.

Owners do sell their businesses for many reasons other than high price including:

  • Age – They may want to retire and are burned out
  • Family – They may have no heir to take over the business or their spouse may be nagging them to retire
  • Insecurity and risk – Selling now while the business is performing well may mitigate their risk
  • Excitement – They simply are excited to be considered for acquisition, because of the prestige or a possible financial windfall

Achieving strategic alignment before discussing price as well as identifying the issues that matter the most to the owner can help you bridge the gap between your number and theirs. When you approach owners with a complete understanding of all the different factors that are important to them – age, community, family, financial, and risk – you increase your chances of building a successful acquisition.

Owners are usually skeptical or defensive when asked about selling their “not-for-sale” company. In fact, many will hang up or refuse to consider your offer. If you do manage to break through and get the owner to agree to a first meeting, your job is to put them at ease, dissuade fears and communicate the strategic value of an acquisition. A positive first meeting is essential to executing a successful deal.

One of the best ways to make an owner comfortable is to meet on their terms. Let the owner pick the restaurant and meeting location. This has a number of benefits: the owner will naturally be more comfortable and open to discussions in a familiar settings and you will also learn a great deal about the owner and their personality.

Prior to the meeting make sure you do your homework and have an understanding of the seller as both a business owner and as a person so that you can discuss their hobbies, family or any other topics they enjoy during the first meeting.

Most importantly, you should behave as if you were their guest by being respectful and listening. You do not want to come across as a hostile acquirer who wants to take over their business, but rather a potential partner that will bring mutual success to both companies.

Learn more about contacting owners in our webinar “The First Date”: Contacting Owners and Successful First Meetings on April 20.

After this webinar you will be able to:

  • Explain what typically motivates owners to sell
  • Describe effective contact strategies for getting and keeping owners on the phone
  • Detail how to use market and prospect research to gain credibility with an owner
  • Outline steps for a successful first face-to-face visit with an owner
  • Develop a persuasive first meeting presentation to highlight the strategic fit between your company and the prospect

“The First Date”: Contacting Owners and Successful First Meeting

Date: Thursday, April 20, 2017

Time: 1:00 PM – 2:00 PM EST

CPE credit is available.

Trust is everything. As leaders, we can forget this during the excitement of a deal. We can get caught up in reviewing financials, bogged down in the details of due diligence, or absorbed in mountains of research and completely forget about the humans involved in the transaction. When you take a moment to think, it’s obvious that no deal can take place without some level of trust between the two parties.

I was reminded of this a few weeks ago when I had the opportunity to participate in an event, From DoG Street to Wall Street, at the College of William & Mary. The event connects current students interested in finance and investment banking with alumni, and I was happy return to my alma mater to answer questions and discuss my experience.

David Braun Dog St to Wall St

Participating in the investment banking roundtable discussion at From DoG Stree to Wall Street.

During the event I shared with students was the importance of trust and relationships in mergers and acquisitions. When I speak about relationships I don’t mean relying on your friends and network to make deals. I simply mean establishing a connection with another person. Especially in the world of not-for-sale acquisitions, paying attention to the human aspect of M&A is critical. Our philosophy is built on relationships and we work hand-in-hand with our clients from initial strategy development through deal execution in order to ensure they are in the best position for long-term, strategic growth. Some of our clients have stayed with us since we were first founded in 1995.

We not only take this approach with our clients, but also with the owners of acquisition prospects. In the world of privately held not-for-sale acquisitions trust is critical. Unlike in for-sale auctions, most owners of not-for-sale companies are not looking to sell their business to anyone, let alone a stranger, and many are initially distrustful of any potential buyers. Focusing on the mechanics of the transaction and financials at the onset is a sure way to kill any potential deal. The path to a successful acquisition begins with winning the owner’s trust, sharing your strategic vision, and developing a relationship that leads to mutually beneficial acquisition.

Photos courtesy of the College of William & Mary

“Why should I let you buy my company?” Chances are an owner will ask you this question during the course of your acquisition and you must have a convincing answer. While the strategic fit and benefits of an acquisition may be abundantly clear to you, an owner may not share your perspective. As a leader, you have years of experience working in your organization and a deep understanding of the business, but the owner may be completely unfamiliar with your company or even have false impressions. In the world of not-for-sale acquisitions, many owners have not even considered selling their business to anyone, let alone you!

What Makes Your Company Great?

In order to build a convincing argument, start by analyzing your own company. What makes your company great? Do you have a new technological capability? Are you leveraging unique distribution channels? Do you have the leading product or service? Are you strategically positioned in the marketplace?  Clearly communicate your the advantages of working with your company and your strategic value as a buyer. Don’t assume the seller already knows everything that you know about your business.

Communicate Strategic Value

After you have an understanding of your own company, it’s time to move onto the seller. Make sure you do your homework before meeting with the owner. Obviously you may not know everything about the seller, but it’s important to take the time to be knowledgeable about the company and the owner. Even simple touches such as tailoring your presentation materials can show that you are invested in the acquisition. In your meetings with the owner, show why an acquisition with your company makes sense and how you can grow together. You must sell your vision for the newly merged company and get the owner inspired and excited to join your team. Make sure you also listen to the owner and take their perspective into account.

For an owner of a privately-held company, the business is their baby and using hard-nosed tactics to negotiate for the lowest price is ill-advised. The human factor cannot be overlooked when pursuing M&A and establishing trust with an owner is critical.

Buying a privately-held business is not like buying a car where you can negotiate the lowest possible price and then drive away and never see the salesperson again. In this case you end up driving off the lot with the salesperson in the car. Often, in a privately-held acquisition, the owner stays on and continues to work in the business for a number of years. Focusing on cost-cutting and financial engineering is no way to establish a successful (and profitable) working relationship.

Here are three ways to remember the human factor when speaking with owners:

  1. Communicate strategic rationale – Most owners receive numerous offers for their business so it’s up to you to stand out from the pack. Clearly communicating the strategic rationale for an acquisition and prove that you’ve done your research to differentiate you from others.
  2. Buy often, sell once – There is an asymmetry with buyers and sellers. You can buy as many businesses as you want, but the owner can only sell their business one time. It’s important to establish trust so the owner feels comfortable giving their “baby” away.
  3. They are all for sale…for the right equation – Just because a company is “not-for-sale” doesn’t mean it’s not for a sale. It simply means the owner isn’t actively trying to sell the business. It’s up to you to find the right factors – financial and nonfinancial – that will change a “no” to a “yes.”

 

 

Q: When a company has two owners that are equally involved is it advisable to ask them to choose only one negotiator, especially at the final stages?

A: Negotiating with one owner of a company and convincing them to sell their business can already be challenging. The situation becomes more complex when the company you wish to acquire is owned by more than one person.

When you are dealing with a company that has two owners, our experience tells us that you are actually in two negotiations and you will want to have conversations with each individual. Since both owners are actively involved in the business now, you should assume that they will both be actively involved in the future.

Before moving down the path of multiple negotiations, first make sure you understand their operating agreement. It may be that one of the owners cannot call the shots based on the legal documentation that papers their partnership. Once you have an understanding of how the company is set up, you can begin handling the two negotiations.

While one owner may have control of the company, you absolutely do not want to have exclusive communication with this person. The controlling owner may accurately portray the situation in some cases, but on the other hand, they may blatantly misrepresent the second owner’s feelings and thoughts.

What we’ve found is with multiple owner – two or more – each owner has a different time horizon, different motivation to sell, and a separate list of things in their “equation” that will make the deal work. It ifs important that you have multiple conversations so you can negotiate the right deal for both owners.

* This post was submitted by Capstone Managing Director John Dearing. This question comes from our webinar “Successful Negotiation Tactics.” Learn more about Capstone’s webinar series.

We recently had a situation where our client, the buyer, was pursuing the acquisition of one of their suppliers. The buyer expected the process to be relatively easy because he and the seller had known each other for years.

However, when he tried to speak to the owner about possibly selling his company, he was mysteriously unavailable. The buyer couldn’t figure out why his calls weren’t being answered.

From our client’s perspective, he had a good working relationship with the owner and they had been doing business together for a number of years. We did a little research and discovered that in actuality the seller had been holding a grudge.  The buyer had no idea why the owner was upset or that there were any problems at all!

By digging deeper we were able to get to the root of the issue. The seller was concerned that our client had never really been serious about acquiring his company. He didn’t want to spend all the time and effort going down that path just to be left at the altar.

Fortunately, because we discovered the issue, we were able to communicate that our client was indeed serious about pursuing the acquisition, and we were able to massage wounded egos.

What’s to be learned from this? There are many things that an owner of a company, especially one that is “not-for-sale”, will feel uncomfortable communicating to the buyer. Many owners are going through the M&A process for the first time and may simply feel nonplussed or overwhelmed. They may have questions that they are afraid to ask the person who could later become their boss.

This is one of the reasons why having a third party advisor can be beneficial. An owner may be more comfortable speaking more candidly with an outside party. At the same time the advisor acts as a buffer between the buyer and the seller, handling any hurt feelings or frustrations in order to preserve the relationship.

In order for a deal to be successful, both buyer and seller must be aligned on the terms and the strategic value of the deal. Creating that alignment requires tact, skill and sometimes a little outside help.

When contacting an owner about acquisitions, don’t be surprised to hear “no.” Most owners, when asked about selling their “not-for-sale” business will automatically refuse simply because it’s unexpected. Remember, for an owner focused on running the day-to-day operations of his business, this offer is coming out of the blue. There are, of course, a number of other reasons why owners don’t want to sell including history, age, family, and community. Don’t be afraid of rejection or give up after the first try. If you are persistent, you may find the owner is open to at least talking to you or meeting with you to hear you out.

However, in some cases, despite your determination, you may find that the owner still is not interested in selling or any type of partnership. So what do you do? Do you keep calling him or do you give up?

When contacting an owner about selling his “not-for-sale” business you must be persistent, but not obnoxious. It’s important to strike the right balance. If you’re at an impasse with an owner who is not budging on his “not-for-sale” position, there are a few strategies you can employ.

Write the Owner a Letter

If the owner is still refusing to meet with you after multiple phone calls, try taking the conversation from verbal to written. In a letter, you don’t seem as pushy and the owner has more time to think through his response rather than react in the moment.

Stay in Touch

If the owner still seems uninterested after a letter, put him on a keep in contact list. We have a list of prospects that we call every quarter to check in and see if anything has changed since we last spoke to them.  A big part of acquisitions is timing and an owner who is not ready to sell today, may be ready six months down the road. When something changes in his business and the switch flips, he may pick up the phone and call you. While there’s no guarantee that the owner will sell, at least if you made the initial approach, when he is are ready, you will be at the top of the list as a potential buyer.

Move on

If you’ve tried both of the strategies listed above and still have not had any success, it may be time to move onto another prospect. You shouldn’t keep beating a dead horse and some owners are really not going to sell their business no matter what.

If you have a robust pipeline of acquisition prospects that you are pursuing in parallel, this won’t be a major setback to your acquisition program. With many options you increase your chances of a successful acquisition.

Think about the last time that you met somebody for the first time: a coworker, a friend, a romantic interest, or even a new barista at the coffee shop.

When you first met this person, whether you consciously thought about it or not, you formed an impression of them, even though you didn’t really know them. Depending on your interaction, you may have found them kind, exciting, rude, or boring. On the other side, they also formed an opinion of you.

Once formed, a negative opinion can be very difficult to change. You only have one chance to meet someone for the first time. We can’t go back and change the past if the meeting goes poorly. That’s why we try hard to make a good first impression in a job interview or on a first date.

In acquisitions, by the time you make contact or meet with an owner, you have already dedicated significant time and resources formulating your strategy, researching markets, and identifying quality acquisition prospects. You don’t want all your efforts to go to waste because of a silly mistake.

With owners of not-for-sale companies, making a good impression is essential. It’s the first step in building a relationship that could lead to a successful deal. It’s important not to forget the human aspect during this critical first meeting.

Tips for Making a Good Impression

Here are some tips for making a good first impression when meeting the owner of a potential acquisition:

  1. Be knowledgeable – Do your research before contacting the owner so you are educated on their specific industry and company. An owner will form a better impression of someone who has invested time in understanding their business. It shows that you take acquisition seriously.
  2. Customize your materials – If you’re sharing any kind of documentation or presentation, be sure to reference the target company and add details specific to their business. This will communicate that you have particular interest in them, and they are not just one prospect on a list.
  3. Demonstrate strategic value – Why should anyone sell their company to you? Make sure you have a compelling answer in terms of a long-term strategy that shows growth for both their entity and yours.
  4. Establish trust – Understandably the owner may be wary in your first interactions, but establishing trust early on is incredibly important. By following the tips above, you’ll be on your way to developing a positive relationship with the owner.

Make a good first impression in your next owner meeting. Join our upcoming webinar on April 21 to learn best practices on approaching owners.

“The First Date”: Contacting Owners and Successful First Meetings

Date: Thursday, April 21, 2016

Time: 1:00 PM EDT

 

Photo Credit: Franklin Heijnen via Flickr cc

Do you know who will read your letter of intent? Many assume that only the owner of the company you wish to purchase will read the LOI, but often there’s a wider audience.

While the owner is your top priority, there are other likely readers of the LOI you need to consider: the board of directors, the accountants (especially those involved in taxes), the management team, and other stakeholders. Even the owner’s spouse may impact the transaction significantly.

When I put together an LOI, I try to brainstorm the likely interests of every possible reader who might influence the seller’s decision-making. When you’re composing your LOI it’s important to remember the entire audience. After all, you won’t be able to accompany the document once you send it to the seller so it’s important to appropriately address the concerns of all parties involved.

As I’ve mentioned before, the LOI is an excellent marketing tool and you have the opportunity to differentiate your business from others by considering the needs, wants and desires of not only the owner, but also anyone else who may be involved in the transaction.

Because the LOI is a relatively formal document, you might assume that it needs to be written entirely in legalese. There’s no rule that requires this. In fact, the LOI gives you a golden opportunity to make your voice heard. A good place to do this is at the beginning of the document. Start the LOI not with legalese—the wherefores and therefores—but with a conversation.

Talk about the seller’s business and your business and why bringing them together makes good sense. Try to convey your excitement about the transaction and your strategic vision. You want the owner to hear your message loud and clear, along with the other people trying to influence the decision.

Photo Credit: Pete

Q: How often are you able to bring together both buyer and seller functional personnel during due diligence? Some sellers might be sensitive to confidentiality and not open to bringing their personnel into the fold.

A: When conducting due diligence, we advocate a functional approach, where leaders from the buyer’s organization meet with the seller’s. There are a number of advantages to this approach including paving the way for a much smoother integration once the deal is complete. However, sometimes you have cases where the seller, most often the sole owner of the company, wants to keep the deal quiet for as long as possible. Of course, it’s natural for a seller to feel this way because he or she does not want to alarm among the employees or generate unrest in the business for a deal that may or may not happen.

In cases like these, we have been most successful if the owner has at least a few trusted confidants that can act as proxies for some of the functional area leaders. In this case, you will not have an army of twenty functional leaders from your organization meet with the respective leaders on the seller’s side, but you may compile lists of questions that will be directed through a Vice President of Human Resources or a Vice President of Operations that the owner trusts. As much the owner wants to maintain confidentiality, we strongly advise he or she has at least one or two others from the organization involved in the transaction and due diligence.

If the owner wants to keep the acquisition completely under wraps, it is up to you to make a business decision of whether or not you want to continue pursuing M&A with the company. If you do continue down the path, you should have strong reps and warranties because you are not able to conduct accurate due diligence prior to the transaction closing. This way, there will be some recourse for you should you discover anything after the deal is announced and you have already taken over the company.

* This question was asked on our webinar “M&A: From LOI to Close.” Learn more about Capstone’s webinar series.

It goes without saying that the introductory meeting is a crucial step of the acquisition process. If it goes well, your partnership could result in a successful deal. If it goes badly, you may be throwing away a great opportunity and have wasted hours of time and resources chasing the deal.

Your goal for the first meeting is to impress the owner or management team of the acquisition prospect and keep them interested in learning more. In not-for-sale, strategic acquisitions, it’s especially important to convey your strategic rationale and vision for the future. The owner is not looking for a reason to sell, so it’s up to you to convince them to even consider it — and why you would be the best buyer of their company.

I’ve found that, without proper guidance, buyers tend to make the same mistakes in first meeting with owners. Here are 5 common errors:

1. Using a Generic Presentation

Failing to customize your presentation for each target company is a huge mistake; a generic presentation is the best way to get ignored or even kill a deal. No one wants to receive a boilerplate presentation that is irrelevant to their business and current situation. Take the time to tailor the presentation to the acquisition prospect. Think about what you have learned about the company during research and your introductory call. What are the owner’s hot buttons? And what might motivate them to consider selling? Even simple touches like adding the prospect’s logo to the footer of the presentation really make a difference and demonstrate that you are serious about the deal.

2. Bringing In Lawyers Too Soon

Lawyers and advisors are necessary and important figures in M&A, but lawyers aren’t needed at a first meeting. That only elevates tensions and can close off communication with a seller who may be less experienced than you in M&A. Even if the seller decides to bring their lawyers, leave yours at home. We once had an anxious owner who scheduled our first meeting at his lawyer’s office. We agreed, but said we wouldn’t be bringing any lawyers. Upon hearing this, he changed his mind and we ended up meeting at his company and even getting a tour of his plant. Not having lawyers completely changed the atmosphere of the meeting and our conversations. Our client was able to connect on a deeper level with the owner that ultimately led to a successful acquisition.

3. Not Selling Your Vision

Even though you are the buyer, you are effectively trying to sell your vision of a successful acquisition to the owner. How would the transaction benefit both companies? Why do you want to acquire this specific company? Why are you the best buyer for their business? These questions should already be answered and your goals should be clearly defined before you even approach an owner about acquiring their company. Then, once the owner expresses interest, you’ll be able to share your vision and strategic rationale in a clear and convincing manner rather than scrambling to put together an explanation.

4. Taking Charge

Demanding the first meeting be on your terms, or on your turf, puts sellers on the defensive. Let them pick the location and allow them to be your hosts. Making them comfortable may mean they are more willing to talk openly about the possibility of an acquisition.

5. Talking too Much

One huge mistake buyers make is saying too much too soon. The introductory meeting is like a first date. Don’t spill all your secrets right away or expect the owner to tell all. It’s important to keep some information back until a later time. A great way to make sure that you don’t put your foot in your mouth is to limit the time spent during your first visit. Typically we will have a dinner the night before and a three-hour meeting the next morning. Specifically, avoid having breakfast with the owner, and do not stay for lunch. The simple rationale: If you stay too long you may be tempted to fill dead air and venture in too deep too soon. Remember, if all goes well there will be more meetings and more opportunities to share information.

 

SABMiller has agreed to Anheuser-Busch InBev’s $106 billion offer to acquire it. Together, they will form a global beer conglomerate with $64 billion in annual revenues that is estimated to make up 29% of global beer sales. The new company would be three times bigger than its next competitor, Heineken. Given that this is such a large acquisition, the merger will of course, be subject to regulatory approval and the two companies will likely need to sell off some assets in order to gain approval.

Strategic Rationale

With this acquisition Anheuser-Busch will gain access to fast growing markets like Latin American and Africa as sales in traditional markets like the U.S. and Europe have slowed down. This trend is widespread across the beer and even the liquor industry and is forcing large companies to take action. Earlier I wrote about liquor giant Diageo’s strategy to woo African drinkers with its own brand of spirits and beer. It seems like Anheuser-Busch is pursuing a similar path to growth by following future demand. Originally founded in Johannesburg, South Africa, SABMiller is the largest brewer in Africa, with a 34% market share. An acquisition may be the fastest and safest route for Anheuser-Busch to enter into a new market and attract new customers.

Negotiations

The agreement comes just days after SABMiller rejected Anheuser-Busch’s offer. As with many publicly traded companies, there were multiple shareholders to convince which took many talks over the course of several weeks. The investment bank 3G Capital which helped put together Anheuser-Busch, negotiated with two of SABMiller’s biggest shareholders: the Santo Domingo family and tobacco company Altria.

In any acquisition, understanding the motivations of the seller is critical to the success of an acquisition. In the case of Anheuser-Busch, without the approval of the two largest shareholders, SABMiller would not have agreed to its offer. Although privately held, middle market companies typically do not need to negotiate with multiple, large shareholders, especially not publicly, you may need to negotiate with two owners or even a family. These owners may want different things out of an acquisition. As a buyer, it’s up to you to figure out what the owner or owners really want and what will motivate them to sell. In this case, SABMiller, wanted something in addition to a high premium, it wanted assurances that the deal would pass regulatory approval and a $3 billion breakup fee.

Photo Credit: nan palmero via Compfight cc

When you’re pursuing an acquisition, making meaningful connections with the right people at the right companies can be challenging.

Who is the right person to contact? How can you go about contacting them? And once you do get in contact, what do you talk about to capture their interest?

These questions are I frequently hear from company executives.

One client of ours received no response after contacting both the owner and the CEO of an acquisition target about a potential partnership. He put it this way: “We have our people talking to the same ten key contacts, but there’s little to show for all our efforts.”

While he knew the right person to speak with, he was still unable to open the door to begin a meaningful dialogue. It’s not enough to know the players; you have to understand how to approach them and how to keep them interested. Here are three common questions we hear and three answers to help you with your contact strategy.

1) Who is the right person to contact?

Typically in a privately held, not-for-sale acquisition you’ll want to contact the owner or owners of the company. You might also contact the company CEO, president or another executive. Usually this information is listed on the company’s website or some secondary source of information. But first, do some primary research with lower-level employees in sales or operations without disclosing your interest in acquisition. They can provide you with additional insights into the company so that you’re fully educated and prepared when speaking with the owner.

2) Why haven’t they called me back?

Was it something you said? Maybe. Or maybe they never received your letter or email. Unfortunately you may never know why they didn’t respond. This is why I recommend calling instead of sending a letter. It’s a lot easier to get feedback from a live dialogue and to gain deeper insights. You’ll at least know they heard your message through all the clutter.  This is also a great reason for having multiple target companies… there’s bound to be a percentage of owners who never respond to your invitations.

 3) How do you keep the target interested?

Your goal during a first call is to draw the owner of an acquisition target into a conversation. Don’t try to get them to sell their company over the phone – no one is going to do that! Instead keep them on the phone by demonstrating your knowledge of their company and business and your strategic vision for a partnership (whether that be 100 percent acquisition, joint venture, strategic alliance, or minority investment).

Our clients find that they may have trouble opening doors with the correct people, even if they are familiar with many of the players in their space. These tips should help, but speaking with owners does require a certain amount of expertise and practice. Even after 20 years of experience, we still hear the word “no” on occasion. Each contact you make with an owner is a link in the chain that could lead to a prosperous acquisition. Don’t ruin your chances for a successful acquisition by making preventable mistakes. Make sure you’re prepared.

You can learn more about contacting owners in our upcoming webinar: “The First Date”: Contacting Owners and Successful First Meetings.

Photo Credit: bachmont via Flickr cc
Time your negotiations by understanding owner psychology.

Everyone wants to talk about price in mergers and acquisitions. It’s often the number one focus of buyers and sellers…but for opposite reasons. Both are likely to say they are looking for a “good deal,” but this can have a completely different meaning depending on the perspective.

Buyers often tell me they are considering an acquisition, and if a “good deal” appears, they will buy the company. And by “good deal” they mean a cheap deal. On the other hand, sellers are usually hoping to offer their business to the highest bidder. This disconnect between buyers’ and sellers’ expectations is further emphasized when they put price as their top priority and use it to qualify a deal as good or bad. The truth is there are many nonfinancial factors to consider when you’re contemplating a purchase. The key is to understand owner psychology and what a huge part this plays in the decision to sell. Continue reading this post on AMA Playbook.

*This post was originally published on AMA Playbook. Visit David Braun’s author page to read all of his articles.

“I felt so vulnerable. I didn’t know what to do or what to talk about,” Dan told me. As the CEO of a food manufacturer who was pursuing acquisitions, he had a first meeting with an owner of a packaging facility before he engaged Capstone. When we met he expressed feelings of uncertainty and how he realized that he was out of his depth with the CEO. While his meeting didn’t end in disaster, it also wasn’t a resounding success. Dan certainly wished he had been better prepared.

This scenario is quite common, especially for first-time acquirers who are pursuing not-for-sale acquisitions. Meeting with an owner and convincing them to let you buy their company is a daunting task for anyone. Depending on the owner, it can be challenging even for me with over 20 years’ experience. Broaching the topic of acquisition can be awkward, even emotional.

Here is advice for meeting with an owner whose company you are seeking to acquire:

1. Remember the human factor

Don’t forget that the owner is a person who wants to be respected and listened to, just like you. The acquisition process is about developing a relationship, from that initial call to your first meeting and to subsequent meetings through due diligence, closing and integration. It may sound like simple advice, but common courtesy matters.

2. Put your best foot forward

In some ways, meeting the owner is like a job interview. You only have one chance to make a first impression so be fully prepared. Share why allowing you to buy their company is the best decision. Write down what you will actually say to the owner and practice this answer out loud. Role play with a member of your staff if you need to get comfortable and make your argument convincing.

3. Prepare materials

One way to make a strong impression is to prepare a first meeting presentation and takeaway materials. These should demonstrate the overall vision you have for the acquisition without appearing to be abstract or vague. Address specific areas where you see synergies between the two companies.

4. Leverage your research

At this point you likely have a wealth of information from market  and prospect research conducted during the M&A process. Use this research to your advantage to demonstrate your level of interest and to strengthen your credibility.

5. Understand your audience

Especially with not-for-sale acquisitions, it’s important to understand what motivates the owner. What will convince them to sell? Prestige? Money? Health insurance for their entire family? Community activism?

For example, we once won a for-sale auction even though we were not the highest bidder. Why did the owner sell to our client? As part of the agreement, our client planned to keep the factory open and retain the entire staff. The owner told us, “I live in this town … if they had shut down the plant, a lot people – including friends and family members – would have been hurt.”

To find out more about contacting owners, read my article in AMA Playbook “Approaching an Owner for a Possible Acquisition? Don’t Write, Call.”

 

 

How do you begin your courtship of a not-for-sale company?

Sending a letter is fairly common practice for contacting owners, but it’s not the most effective way to communicate. A letter will not attract the owner’s attention and likely will go into the trash without being read.

There’s a better way to stand out from the sea of buyers and make sure your message is heard: I suggest making a phone call. You might think calling too forward, but it is an excellent way to differentiate you from your competition and to start a positive relationship with the owner. Continue reading this post on AMA Playbook.

*This post was originally published on AMA Playbook. Visit David Braun’s author page to read all of his articles.

“Hello, I’d like to buy your company.” If this were the way I began my phone calls with owners, none of our deals would be successful.

Speaking with owners, particularly of privately held, not-for-sale companies, requires the right strategy and approach. After all, you only have one chance to make a first impression and your goal in the first call is to keep the owner from slamming the phone down and hanging up on you. Learn how get and keep owners on the phone in our upcoming Capstone webinar:  “The First Date”: Contacting Owners and Successful First Meetings.

This webinar will:

  • Explain what typically motivates owners to consider the sale of their business
  • Describe effective contact strategies for getting and keeping owners on the phone
  • Detail how to use your previous market and prospect research to gain credibility with an owner
  • Outline steps to take for a successful first face-to-face visit with an owner
  • Develop a persuasive first meeting presentation to highlight the strategic fit between your company and the prospect

Date: February 20, 2014

Time: 1:00 PM ET – 2:15 PM ET

Register: https://www3.gotomeeting.com/register/759491582

CPE Credit Available

 

Photo Credit: Karolina Kabat via Flickr cc

Here is a thought that many miss when they embark on an acquisition process: There is an inherent asymmetry in acquisition that puts the buyer and seller on different planes. You can buy companies over and over again, but the owner can sell his company only once.

Though you, the buyer, may be taking significant risks with making an acquisition — financially, strategically, perhaps personally — nevertheless, there is a likely far more at stake for the owner.

This asymmetry naturally makes the owner more cautious and skeptical.

Understanding owner psychology is critical to successfully contacting owners and securing a face-to-face meeting. This will be my focus at my next webinar, this Thursday, April 18 at 1:00 PM EDT.

I invite you to join me on Thursday, and be sure to have your questions for me ready. You can register for the webinar here.

During the webinar, I will discuss how best to make the first contact with an owner and how to secure a meeting. I will also guide you through the meeting itself — your “first date” with an acquisition prospect.

 

*This post was adapted from David Braun’s  Successful Acquisitions, available at Amazon.com