Acquiring a company is a delicate process and requires the right approach.
Here are a few strategies to make the initial outreach and start a dialog that increases the likelihood of reaching a deal.
BUILD RAPPORT:
Begin with a personal introductory meeting that doesn’t jump straight to business.
Introduce your company and role, and allow time for some of the tension to cease. Building trust and credibility earlier on can make the process go smoother later.
BE PREPARED
Anticipate that the seller will inquire about your motives and abilities.
The most common questions (whether in the first meeting or the ones that follow) will be:
The buyer’s reasons for wanting to acquire the seller’s company. Whether its to gain a product capability, enter a new market, or geographical expansion – explaining the reason for the interest in the seller’s business will build trust and credibility. This can help assure the seller that the buyer is not simply kicking the tires on a number of similar businesses, but has a genuine reason to take the transaction seriously.
The buyer’s financial situation. The seller needs to be convinced that the buyer has either the cash or the financing capacity to successfully close the deal.
The impact on the seller’s employees. While this is often a sensitive issue, expect to work together to determine who will be retained after the deal closes, and who will not. Sellers want to know if there will be head-count reductions only from their (Target’s) organization or if there is an opportunity to create an improved combined management structure by aligning roles to the best people from both sides.
CONSIDER RETAINING THIRD-PARTY HELP:
If the buyer has an experienced corporate development or acquisition team that has executed deals like these before, this may not be necessary.
If not, a third-party advisor can help by:
Helping identify the right targets to begin with, aligned with the buyer’s strategic goals
Manage the process and design the initial outreach process
Set valuation expectations that are reasonable and aligned with the market
Structure and negotiate the deal to close
Approaching a prospective seller requires tact, timing, and candor.
With the right approach, a buyer can break the ice, earn the seller’s trust, and set the stage for successful negotiations down the line.