Mergers and acquisitions (M&A) can be a game-changer for many businesses, providing opportunities for growth, market expansion, or an exit strategy for founders. One way to gain an edge when navigating the complex M&A landscape is through working with intermediaries. Intermediaries are like the ultimate matchmakers in the M&A process. They bring buyers and sellers together, providing access to potential deals, helping with valuation, and smoothing out negotiations. With their help, you can find the perfect fit for your strategic goals and be better prepared for a seamless transition during acquisitions or divestitures. But how can you work with intermediaries effectively? This post explores some quick tips that founders and business owners can use to cultivate successful relationships with M&A intermediaries and optimize the likelihood of closing a great deal.
1. Standing out from the crowd
M&A markets can be competitive and brokers can find themselves flooded with interest, especially for their top listings. So, how can you set yourself apart?
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- Genuine, Meaningful Conversations: Go beyond surface-level discussions. Share your vision, strategic approach, and how acquiring a specific business aligns with your long-term plans. Experienced advisors and brokers can tell when you’re just kicking the tires.
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- Showcasing Personal/Professional Connection: Demonstrate your commitment and prove that you’re not just another interested party, but the perfect match. Do you have industry expertise? Let it shine through. Have you built a track record in the space? Make it known that this isn’t your first rodeo. Maybe you’re just relentless with personal drive and a plan to win. Craft that compelling case for why you’re the best buyer for their seller.
2. The art of the follow-up
The name of the game is persistence.
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- Don’t be Generic: Up the impact of your communication by personalizing your outreach and clearly articulating your unique value proposition early, anchoring around points of reference that could differentiate you from competitors.
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- Never be afraid to get creative: Utilize video messages or provide an analysis of how you’d contribute value and grow the business. Demonstrate your enthusiasm and commitment.
Remember, silence isn’t always a no and deals fall apart all the time. Just because a company is under LOI or seemingly almost at the finish line doesn’t mean that door is closed. Follow up!
3. Leverage Financing Structures
As an individual, small firm, or early-stage company, you may not be able to outbid the private equity giants, but you can still be competitive in the bid process.
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- Be Creative: Optimize cash at close and consider tailored deal structures such as seller financing or earn-outs. These approaches can prioritize upfront payoff for the seller, giving you a competitive advantage and them additional upside.
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- Challenging the Big Firms: During negotiations, the ability to be flexible and adaptable to different deal structures is an advantage. Gain an edge by showing that you can compete in the market, even against those who may be greater resourced. Staying nimble allows you to navigate complex transactions and seize opportunities.
4. Preparation is Key
If you stay ready, you don’t have to get ready. When dealing with intermediaries, you’re level of perceived professionalism is correlated to how prepared you are.
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- Go Beyond the Lender Letter of Support: Prioritize engaging in critical discussions with multiple lenders to explore various financing options. While not necessarily a requirement, being prepared with a pre-qualified financing package not only demonstrates your commitment but also showcases an understanding of the financial landscape.
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- Assemble Your Dream Deal Team: Ensure you have a stellar deal team comprising experienced lawyers, knowledgeable accountants, and strategic advisors who can provide valuable insights throughout the process. This will not only send a powerful message about your determination to move forward swiftly but also instill confidence with potential investors and stakeholders that you can put the pieces together to be successful.
5. Embrace Collaboration
At the end of the day, you’re on the same team. Working well with intermediaries is about fostering a collaborative approach.
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- Embracing the Broker’s Process: Understanding the importance of embracing the broker’s established process is paramount. While it may seem meticulous at times, adhering to the process demonstrates your dedication, dependability, and professionalism.
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- Harnessing the Power of Cooperation: Cooperation plays a pivotal role in the success of any transaction. By being cooperative and responsive throughout the process, you can build trust and establish stronger relationships with both clients and brokers. This entails promptly providing requested documentation and completing due diligence requests in a timely manner. By doing so, you not only expedite the process but also demonstrate your dedication to achieving mutual goals and ensuring a seamless experience for all parties involved.
Intermediaries play a vital role in the M&A process. As a founder or business owner, your ability to provide value, be persistent, creatively structure deals, prepare rigorously, and collaborate effectively greatly impacts your M&A success. Each interaction with an intermediary is an opportunity to demonstrate that you’re the best fit for their deal. Embrace cooperation, preparation, and strategic communication to set yourself apart and foster trust and respect. Keep these tips in mind as you navigate mergers and acquisitions.
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