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Capital Ideas for Middle Market Businesses

5 Key Techniques of Successful M&A

How to get a Premium Value with Less Risk

By Dan Vermeire, Managing Director
Dallas Office
Corporate Finance Associates

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Today’s market has brought many sellers off the sidelines – and for good reasons. Cash is plentiful and buyers are aggressive. If you’re thinking of jumping in, you need to know how to get a premium price, and how to lower the risk in a successful transaction. Knowing these 5 Key Techniques will help.

  1. Know How to Manage Confidentiality
    Attention to confidentiality can make a big difference in how your business survives the M&A process. Imagine if your customers, employees, suppliers and competitors all knew the details of your business and that you were seeking a transaction. You’d have some ‘splaining to do. A good M&A process is designed to protect confidentiality, and for Investment Bankers in the Middle Market, it is paramount. Strangely, most business brokers do not protect confidentiality and often post information on the internet. Be sure you have the right process and control the information flow.

  2. Be Prepared With a Good Book
    In the M&A process, the “book” is the marketing presentation about your company. AKA the Confidential Information Memorandum, or CIM, the book is designed to answer the buyers’ questions before they are asked. Better to answer the questions before you begin the process, than to wait and answer them as they come up. A good book is key to controlling the timing of the M&A process, and avoiding the stop/start of piecemeal questions.

  3. Let the Data do the Talking
    Most buyers are data junkies – they almost can’t get enough. To be successful in M&A and get a premium price, you need to do the work, perform the analysis and produce a lot of data. Slice and dice sales a half-dozen ways, characterize the customer base, show employee categories, review trends, look at financial ratios for the company and compare to the industry, and so on. Every company has strengths, so present the strengths through the data analysis.

  4. Be Proactive, Not Reactive
    Some business owners wait for prospective buyers to call. The thinking is “I’ll sell when somebody calls with the right number." This is only a reactive process and there are at least 3 reasons why this approach doesn’t work: a) you can’t get a premium because you can’t get any “auction” effect, b) you can’t control the timing and have no leverage in negotiations, and c) you don’t know if the best buyers will call you. Instead, try working proactively. Do the research, figure out who are the best buyers, approach them with well-prepared materials, and solicit offers in a confidential, controlled, process.

  5. Hire a Professional
    You know the buyer will have professionals on his side of the table. Having a professional on your side will make a big difference in getting a premium value and avoiding risk along the way. Besides, most Investment Bankers will generate 4-5 times their fee in additional value to you.

For most business owners, an M&A transaction only happens once in their lifetime. Now is an exceptionally good time to enter the market, but it is well worth your time to visit with a professional Investment Banker before taking those first steps.


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