How does the business owner view their business?
And what does this have to do with M&A?
A lot.
Based on the companies we’ve worked with, I’ve identified seven types of business owners.
Each has different values and goals.
Some people know what drives their decisions, several don’t (consciously)
And not everyone falls neatly into one of these categories
Regardless, the ownership mindset determines how they operate their business, and how they view M&A.
HERE GOES.
SEVEN TYPES OF BUSINESS OWNERS:
1) LIFESTYLE BUSINESS OWNERS:
Run businesses primarily to sustain a particular lifestyle rather than for aggressive growth or large profits.
Business operations sometimes align with personal passions or interests (e.g. someone who loves baking and running a bakery store).
Tend to prioritize work-life balance. The business gives them the freedom to engage in personal hobbies, travel, or spend time with family.
Resistant to aggressive expansion or scaling, as that could disrupt the very lifestyle the business was meant to support.
M&A might not be on the forefront of their minds, but they might consider it if it allows them to maintain or enhance their desired lifestyle.
2) LEGACY BUILDERS:
The business is an extension of their personal brand or legacy.
Focus on long-term sustainability, community involvement, and perhaps even generational continuity.
Often hesitant about M&A unless the acquiring entity aligns with their values and vision for the company.
The business’s reputation and how it impacts the broader community or industry is of paramount importance.
3) SERIAL ENTREPRENEURS:
Always on the lookout for the next business opportunity or venture.
Likely to build a business, sell it, and then move on to the next one.
Tend to have a keen sense of market dynamics and are quick to adapt to changing market needs.
Understand the M&A process well, given their experience with buying and selling businesses.
4) RELUCTANT OWNERS:
Inherited the business or took it over due to unforeseen circumstances.
Might not have the passion or skills to run the business effectively but feels a responsibility to continue.
Could be open to M&A opportunities as a way to ensure the business’s survival or to pass it on to a more capable entity.
5) FINANCIALLY DRIVEN OWNERS:
Primary motivation is financial returns.
Highly responsive to market trends and shifts.
May rapidly pivot business strategies to tap into lucrative markets.
M&A is viewed purely from a financial return perspective. Will be highly interested if the deal promises substantial monetary gains.
6) INNOVATORS:
Always looking for ways to disrupt or innovate within their industry.
Business might be in a constant state of flux due to their focus on R&D, new product development, or adopting new technologies.
M&A is appealing if it brings in new technologies, intellectual property, or capabilities that can further their innovative endeavors.
7) SOCIAL ENTREPRENEURS:
Business is designed not just for profit, but to address social or environmental challenges.
Often blend non-profit and for-profit approaches to create sustainable social change.
M&A interest might be driven by opportunities to amplify social impact, access to broader networks, or resources to further their mission.
HOW DOES THIS IMPACT M&A STRATEGY AND PROCESS?
AS AN ACQUIRER:
Knowing what makes the CEO tick is vital to framing the offer and the value proposition of an acquisition the right way.
If you’re considering making an M&A offer to an acquisition target,
How do you identify the business owner’s mindset?
How do you structure the offer accordingly?
How do you negotiate?
AS A BUSINESS OWNER:
Being self-aware of and being honest about what motivates you is vital to running the business “clean”, and being able to respond to market conditions – and to fielding M&A interest.
Do you know what makes you tick?
What can you do to manage your business in the steady-state, while being ready for an exit at the right time?
What tradeoffs are you willing to make to do a deal?
How do you negotiate?