When positioning your firm for a potential sale, you should be prepared to talk about all facets of the organization, not just the C-suite.
As an M&A consultant, I come into contact with sellers of all varieties. From “Maybe it’s time to start planning our exit” sellers, to “Get me out of here yesterday” sellers. Anyone considering an external ownership transition should be prepared to answer a few questions that come up in every M&A conversation. You only get one chance to have a first conversation with a potential buyer; you would be well-served by spending some time thinking about answers to the questions that are always raised.
Why are you considering a sale? This one sounds like a no-brainer, but having an honest answer to this question opens up the dialogue in a way that nothing else does. A candid answer to this question starts the discussion with a tone of trust and credibility that are essential to moving the conversation forward.
Tell me about your firm. Sellers need to be prepared to “sell” their firm to the party on the other end of the phone. According to IBIS World, there are 143,172 engineering services firms, and 72,346 architecture firms in the U.S. What makes your firm one in a couple-hundred thousand? Be able to articulate what makes your firm special (i.e. valuable!), and make an impression on the prospective buyer that they will not soon forget.
What are your plans after the sale? I try not to “coach” sellers to give specific answers to questions, but this one, specifically, is my exception to the rule. I don’t have a right answer to this, but I can tell you that the wrong answer is that you plan to retire immediately after closing. If that is the truth, then be aware that leaving the firm before the ink is dry on the transaction documents will drive down your value considerably. The business you have built up will need you to maintain stability for some period of time before you pass the baton to the buyer. Letting the prospective buyer know that you’d like to retire after a few years is a much better answer than telling the buyer that you’re ready to retire immediately.
Tell me about your staff. This is the opportunity to talk about the high quality second-tier of leadership that you have developed and mentored over the last few years (because you’ve done that, right?). Buyers want to know who they can count on in the short-, medium-, and long-term to keep the business on track. Spending the conversation talking about yourself and starting every sentence with “I did this” and “I did that” raises a red flag, especially if you just told the prospective buyer that you’re ready to retire. Focus on the answer to the question from the buyer’s perspective – what can you say about your people that will give the buyer confidence in the ability of your firm to continue to perform without you there?
I experienced a great example of seller preparation at a recent meeting with a prospective seller. This firm prepared a presentation for me to help me understand who they are, why they are the best, and what sets them apart. The presentation included market sectors, a few award-winning projects that they were proud of (and – I loved this detail – which of their all-star staff worked on the project other than leadership!), and their business model. An additional detail that was new to me in these types of conversations was a discussion of all of their major technology and equipment investments over the last few years, from how they financed the purchases, to how they were using those tools to generate revenue. I was blown away. That level of preparation answers a lot of questions before they are raised. I left the meeting with a better understanding of this firm’s commitment to cutting-edge technology, and confidence that this firm was ready to talk to potential buyers.
These questions and examples are just a few of the initial items on the list, but they are the ones that seem to occur during every introductory conversation. Remember that the person on the other end of the phone has already looked up your firm; they know what is on the website. The key to having a great initial conversation (which leads to great deals and partnerships), is preparation. They don’t know who you are and what makes your firm worth pursuing – so take some time and be ready to tell them!
Jamie Claire Kiser is Zweig Group’s director of M&A services. Contact her at email@example.com.
This article is from issue 1153 of The Zweig Letter. Interested in more management advice every week from Mark Zweig, the Zweig Group team, and a talented list of other guest writers? Click here for to get a free trial of The Zweig Letter.
About Zweig Group
Zweig Group, three times on the Inc. 500/5000 list, is the industry leader and premiere authority in AEC firm management and marketing, the go-to source for data and research, and the leading provider of customized learning and training. Zweig Group exists to help AEC firms succeed in a complicated and challenging marketplace through services that include: Mergers & Acquisitions, Strategic Planning, Valuation, Executive Search, Board of Director Services, Ownership Transition, Marketing & Branding, and Business Development Training. The firm has offices in Dallas and Fayetteville, Arkansas.