It’s the call many business owners dream of: out of the blue, a big competitor or maybe a holding company calls and says they’re interested in buying your business. Maybe you instantly start seeing big dollar signs, or perhaps you’re unimpressed, but either way, you’re probably thinking the same thing almost all of my clients do when faced with that situation, “Well, let’s see what they want.”
Stop. Right. Now.
Before you go any further – learning about their priorities and their goals – take a second to think about what you might want out of an acquisition. One answer is dollars, of course, but your ability to earn those dollars is contingent on many things you’ve probably not prepared for, since this was an unsolicited offer. Also, there are many non-financial outcomes you might want in an acquisition, such as delivering more opportunities for your employees, opening up new avenues for growth that could accelerate your company’s performance or giving you an opportunity to do something entirely new. However, those probably haven’t even occurred to you because this was not in your business plan for the year. The bottom line is, they’re prepared and you are not, so if you walk into that first interaction with nothing but finding out “what they want,” you’ll likely emerge focused on their priorities and not your own.
All that said, I’m not suggesting you don’t take the meeting. After all, it could mean growth you never dreamed of or life-changing money for you and your employees! I’m just suggesting you spend a few minutes beforehand asking yourself some hard questions, like these…
Is the growth of your company after the transaction important to you? – If it is, then it’s important to find out if this is a Strategic Buyer, which means they probably also own other companies that sell services or products in the same or similar space as yours. If they do, they’re more likely to be inclined to buy into your company to integrate it into their portfolio, finding synergies and benefitting from the experience of your team to take the business to the next level. If that aligns with your goals, this could be a great opportunity for growth.
Do you want to maximize your cash out upon exit, but stay in the business for a few more years? – If you do, you want to find out if you’re working with a Financial Buyer, which means they’ll be looking at your organization as a standalone investment to buy today and re-sell at a higher value in a few years. These buyers often want to keep the current management team in place after their investment as a stable foundation for the growth they seek in the years to come.
Whatever you want, how long are you willing to wait? – Typically, a transaction like this can take six to nine months. So, if you choose to proceed, be prepared to be patient and to keep your business healthy throughout due diligence. Avoid the pitfall of becoming so distracted with visions about what life will be like after the sale that you lose focus on the attitudes and practices that made your company a good investment in the first place. By staying focused and keeping your business strong, you’ll ensure you’re always in a good position, no matter what path the acquisition conversation takes.
Whatever your answers to these questions might be, understanding them before you walk in that room is crucial to keep you in the driver’s seat when it comes to the future of your business. And if you need someone who has been through an acquisition or two, we’d be happy to help you think through these questions, anticipate the possibilities and discuss the impacts for you and the future of your business. So, whether that conversation progresses or it doesn’t, you’ll know why.
Cristina Silingardi is the Austin Managing Director for vcfo. She has been involved in several acquisitions as CFO for both buyers and sellers and regularly advises clients on the financial aspects of the mergers & acquisitions to keep them focused on their goals.