The new year is a good time to come to market — people are refocused on business and many have made new commitments to make acquisitions. To take advantage of this we’ve been preparing a number of companies that we will “launch” this month. What do we do to prepare? What does a business owner have to do?
What does an M&A firm do?
First, some companies are ready to be sold when they contact us. Others have some issues to work on (contract, legal, profitability, etc), and we usually identify these issues early on and help direct the company – sometimes for a year or more before they are ready for the process.
Once the company is in a good position to be sold, we start the preparation process. One of the most important is to complete a financial analysis that will be presented to prospective buyers. We generally do an analysis before we even sign up a client in order to come to an agreement on potential value, but now we have to nail down the analysis with details and back up data, as well as format it and clean it up.
Most M&A firms (not so much with business brokers) will write a company prospectus, which are called many things, including a Confidential Descriptive Memorandum, a Confidential Business Review, but which most simply refer to as “the book”. Not all books are created equal, with the very worst created with a kit which consists of boilerplate text for the type of company (e.g. manufacturer) and that fills in the blanks with company name, etc. Fortunately we have professionals at
One of the unique benefits of
During the time the book, financial presentation and video are being produced, we also hold a series of strategy meetings to determine the markets, media and countries that we will target, as well as a list of specific corporate targets. We do some preliminary research and database work, and will then hold a strategy meeting with the business owner to fine tune the lists and collect more detailed market information he may have.
The secret to selling a middle market company is in the marketing, so we employ a broad-based marketing effort using a combination of web ads, print ads, mail, email, personal phone calls and telemarketing follow-up when appropriate. As we move closer to launch we have to prepare the appropriate media. HTML emails, direct mail letters, web content, confidentiality agreements, timelines, etc. are readied along with the book, video and any backup documents. We use software that tracks the marketing efforts and responses, so that has to be configured and programmed before the launch.
What does a business owner do?
One of the reasons of why one would want to hire an M&A firm or broker is that a business owner can continue to run the business, so we try hard to keep the communications with the business owner concise and efficient. Here are the typical tasks that the business owner does during the preparation period:
- There are invariably financial questions to be answered, especially as the analyst tries to determine if there are adjustments that can boost earnings and therefore the selling price. Sometimes the financial person or even a bookkeeper can answer the questions, but often the owner will be required.
- There will be some time involved with working with the book writer on creating the book. You can think of the book as a business plan, only a little more sales oriented. Key employees, trends, strengths, opportunities, etc are included.
- A little time will be spent on camera as the videographer guides the video shoot, as well as helping the videographer get the appropriate video.
- There will be one or two strategy calls to discuss the markets, countries, journals and other aspects of the marketing campaign.
A benefit of the process is that if forces completion of every task before launch, which is critical. Once a company is launched, you don’t want anything to slow down or delay the marketing or sales process. Delays kill deals.
Then it is time for the business owner to sit back and watch the campaign. Our software produces reports on the status and responses as the various stages as the campaign unfolds, and we pass these on to the business owner. The process is designed so that we don’t have to involve the business owner until much later in the process, when serious buyers are contemplating offers.