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M&A A SUPPLEMENT OF THE ZWEIG LETTER
What do you bring to the table as a buyer? In an M&A, sellers generally know the basics of what they need to do before a transaction; here’s how buyers should prepare before starting the M&A process. O P I N I O N
W hen it comes to M&A, sellers are usually at least somewhat aware that they need to prepare their firm, clean up the books, and undertake efforts to make the firm more attractive to prospective buyers. Buyers, though, may be somewhat less prepared for the transaction. Especially when M&A deal activity is high in the industry, buyers need to be ready to “pitch” their firms. Sellers have many options when they are ready to transition ownership, and buyers need to be ready to “sell” their own firms when seeking to buy another firm.
Jamie Claire Kiser
and long-term plans. Buyers should have reviewed the prospective selling firm’s “resume” and should be prepared to explain what makes the seller an interesting prospect for the buyer. In addition, the buyer should be able to talk about his/her firm with a high degree of respect for its employees and self-knowledge about its strengths and weaknesses. Discussing things that make the buying firm successful gives the seller greater trust in the transaction and greater motivation to continue discussions with this buyer. It is not usually enough to ask a prospect for a couple of years of financial statements and throw a dollar amount around. Sellers want to understand the real motivation for the acquisition. Buyers need to be ready to explain their value proposition for the proposed transaction. Once the motivation and value proposition are on the table, buyers will be surprised at how many sellers feel engaged in the process and seek to make the equation meet the hallowed “1 + 1 = 3” standard of a successful acquisition. JAMIE CLAIRE KISER is Zweig Group’s director of M&A services. Contact her at jkiser@zweiggroup.com. “As a buyer, you have to be able to articulate your culture and ‘who’ your firm is ... Firms need a mission statement – an explanation of why they are in business – and a vision statement, in addition to a succinct idea of who it wants to be in the future.”
I was with a firm recently that wanted an overview of what M&A would mean for them from a growth perspective. We spent a day together going over the big picture of the M&A process, from finding a target to financing the deal. When it came time to discuss integration, however, the conversation slowed down. The firm had decided upon an inorganic growth strategy and wanted to talk about how to identify and close the deal. Now, these are both necessary components of a transaction, of course, but there’s much more nuance involved in finding the right fit than simply pulling out a map and agreeing on a market sector. As a buyer, you have to be able to articulate your culture and “who” your firm is. Prospective sellers will want to know that their staff will be taken care of through the transaction. They want to make sure that cultures align and common values are shared. Firms need a mission statement – an explanation of why they are in business – and a vision statement, in addition to a succinct idea of who it wants to be in the future. A great exercise for buyers before they start the M&A process formally is to sit around with top leadership and ask them to describe their firm’s culture in one or two words. Corporate culture might not be something that is discussed daily, but it is the reason that every single employee wakes up and comes into your office, instead of your competitor’s office down the street. Once you can articulate and harness what it is that makes your firm an attractive place to work, you have a tool to help you look prepared and serious in the eyes of a seller. Court a seller as you would a high-level candidate for a job. Selling firms, just like job candidates, want to see where they fit into the buyer’s goals
THE ZWEIG LETTER NOVEMBER 16, 2015, ISSUE 1128
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