If you have been looking for any length of time for business, you know that a good, clean business is hard to come by. The good ones that do come on the market can go very quickly. Twice in the last few years we’ve sold companies in the first week they were on the market. A good, interesting company can generate a lot of interest from prospective buyers, and it can be overwhelming for some intermediaries, especially those operating alone (most business brokers work alone, most M&A advisor work as a team). The prospective buyers that contact us range from serious, well-intentioned buyers, to people and organizations who are basically killing time and will never buy a business. There are even some scams running now with some truly bad guys pretending to be business buyers (they purchase all-stock deals with no cash and then strip the company clean). So it is our job as M&A advisor/intermediaries to qualify these buyers and figure out who best to spend our time with.
Your job as a serious buyer is to convince me that you should be at the top of that list. Remember, for a good company there will be many prospective buyers and you want to be able to cut through the crowd and go straight to being a “Grade-A” prospect. It is not just the advisor you are trying to impress. Most sellers truly want “their baby” to go to a good home. In addition, many sellers have to carry some type of note, so whether it is “their baby” or not, they definitely want it to go to a good home that will make the payments.
The best way to do this is to pre-empt the advisor’s request for financials and a resume/backgrounder. Create these ahead of time and offer them up. Usually the advisor will accept them and not require the same information on their own forms. We will. For the resume, create a “buyer’s resume” with your goals, and what you are looking for as well as your credentials. In other words, don’t rehash the resume you used when last looking for a job. A photo is nice too. Don’t be stingy with the financials. A good M&A advisor will never divulge a seller’s confidential information without making sure that the prospective buyer is qualified to buy. If you are overly concerned you don’t have to show everything you have – but enough to make the seller and advisor comfortable that you can pull it off.
I’m not just talking about individuals. Companies looking for acquisitions and professional investors such as private equity groups could make the process easier by providing good summary and financial information. It can also be helpful to get pre-approval for financing such as an SBA loan from an SBA lender. Often a particular SBA lender will be more aggressive at times than others, and your advisor often knows who is “hungry for deals” at the moment.
Be prepared to show the intermediary you can move fast. You don’t have to purchase the business quickly – you should be given plenty of time for due-diligence – but you may have to move fast on the initial analysis and offer to buy. In some cases the advisory firm will run an auction with a specific timeline, in which case you want to pay attention to the timeline. You don’t want to be left behind. It happens. When you do make that offer or letter of intent, make sure you think carefully about any contingencies you wish to have in place. That way you can move fast, yet still cover yourself on areas you haven’t fully researched yet.
But if nothing else remember to create a buyer’s resume and financial statement. It helps greatly in placing you a few places above the buyer who scrawls out the information on the broker’s forms.