Who are you? When you present yourself as a prospective business buyer, that is what the vendor will want to know. The way you answer the question will determine your chances of success in the process. And being understood as a buyer isn’t as simple as you might think.
Know what’s got you into the room
The qualities some businesses tout as hallmarks of their suitability as a buyer are often totally generic. Honesty, integrity, playing by the rules when it comes to contracts and fulfillments, paying competitively – these are a given. That doesn’t mean you shouldn’t mention them in passing (after all, it can’t hurt) but don’t make them the central pillars of your pitch to get in on the deal.
If any of these things were in doubt, it’s unlikely a vendor would be looking at you as a potential buyer. In other words, everyone being considered as a potential suitor – big or small – broadly shares the same generic characteristics. If you come into the room and say that’s all you are, don’t expect another meeting.
Instead you should be pushing the unique characteristics of your business, particularly the ones you feel are shared by the vendor. Looking at it from the seller’s perspective, they broadly have three concerns. Firstly, they want to know that their clients will be looked after under new management. Secondly, they want to know that their business – often the product of a lifetime’s work – will continue to receive the investment and care it deserves. Thirdly, future payments for a business are likely to hinge on its ongoing success; it’s in the vendor’s best interest that client retention remains high.
Giving assurances that these things will happen, pointing out your track record on client retention or supplying cast-iron guarantees on funding will not mark you out in the field. Every prospective buyer will offer the same comforts. What you need is to distinguish what makes your business a better fit as a buyer than the next. Without that, you’re just another generic buyer. So how do you know what to promote?
Gordon Kerr, Ascot Lloyd
We’ve had a long relationship with Gunner & co. which has resulted in a number of successful transactions. We particularly appreciate how they know our business and use this to bring opportunities, which aligns the needs of both buyer and seller.
What the vendor really wants to know about you as a buyer
If you are a smaller buyer, you have two core advantages over larger operations who might be in the running to acquire a financial services business: personality and cultural alignment.
While larger operations may have more impressive acquisition histories, they are often slightly faceless. Vendors, for the most part, are looking for the human touch. They’ve built a business with a culture and personality. Chances are, there will be more cultural alignment with a smaller, owner-operator business than a large national.
While a larger business might offer a boilerplate approach to acquisition, you may feel you can afford to come forward with a bespoke deal that protects the unique characteristics of the vendor’s business. Sell your ability to absorb the company without displacing its inherent personality and you immediately raise your ranking position in the line of potential bidders.
You should also promote the personalities of the leaders in your business. These are the people who will be involved in negotiating the deal, and there is also a good chance that they will sit at the same board table as the vendor after the sale has gone through. Being a smaller business, the vendor may feel they will have more say in the integration of the business during the post-sale period.
Being a smaller business also allows you to present your business as a better cultural fit in terms of levels and delivery of service. Demonstrating that you serve your existing clients with a similar degree of care is likely to put the vendor at ease. A small business is more likely to protect the strengths of the vendor firm than a larger business which may absorb it into its generic machinery.
Striking the right balance in your pitch
Presenting yourself as a unique candidate is an excellent way to put yourself in the running as an occasional or first-time buyer but don’t let your enthusiasm get the better of you. Promoting your strengths is an opportunity to cut through the hum of generic buyers and amplify your cultural similarities. But trying too hard to make yourself look like a good fit at the expense of the truth is a bad idea.
Remember that as the process goes through, the vendor will research every aspect of your business as thoroughly as they are able to. You should tune your pitch to appeal to the vendor’s best interests, but don’t force the issue or alarm bells will start to ring.
You should meet the same criteria as any other buyer, but it’s the details that will bring you to the vendor’s attention. Sell your size as a benefit, your personality as an attribute and your culture as a tailored fit, and you will stand above the field.
Whatever you do, don’t be a generic buyer.
If you would like to discuss the market for potential acquisitions, speak with James here.