There’s no getting around it.
First impressions matter.
And they matter a great deal when you’re meeting a business owner for the very first time.
In fact, you have 7 seconds to make a positive impression before you’ve even opened your mouth.
So, what can you do to up your chances of a successful initial meeting and avoid common M&A deal pitfalls?
Let’s consider 3 best practices.
Best Practice #1 Be clear on your objectives
There’s a lot to unpack and discuss in an initial M&A meeting. So much information it can become overwhelming.
However, by focusing on these two objectives, you’ll find everything else falling into place:
i. Objective 1: Determining whether this business is worth your time, effort, and investment or not
ii. Objective 2: Building rapport with the business owner
In your mind, as you go through the meeting, you can check to see if the demands of objective 1 have been met by answering questions such as:
– Is the business viable?
– Can I see myself still operating it years from now?
– Does it make financial sense to integrate it into my existing setup?
And what of objective 2? How do you satisfy its requirements? This is best done by first understanding the attachment owners will have over their companies.
According to a 2017 study, entrepreneurs love their companies like parents love their children.
With that said, think of the business owner as someone giving up their child for adoption. You can’t afford to be callous in such a situation. You must tread with care.
Therefore, show empathy, be genuinely interested and be present during the interview. Your sympathy will make you stand out from a crowd of prospective buyers.
Summary: The overarching goals of any first meeting: One, determine if you want to go to the next step or not, and then two, do everything you can to build as much rapport and goodwill as possible.
Best Practice #2 Do your research and prepare thoroughly
The first step in getting to know the business you’re interested in is to request a Confidential Information Memorandum (CIM) or a business overview.
If the business has an M&A advisor, they will be your point of contact. Painstakingly read through this document.
Next, you’ll want to do industry-specific research using research platforms such as Capital IQ. More affordable resources for this stage will be libraries and search engines like Google.
Write down any questions that come to mind that you’d like the business owner to answer. And look at other similar businesses for sale, comparing what they are offering against the business you’re interested in. Also, see who your competitors would be as well.
Something to be mindful of during this preparation phase: identify loopholes you can exploit to grow the business once you’ve acquired it. For example, the introduction of a new product, service, or developing an online presence.
Summary: Doing as much research as you can upfront on that industry is going to be important. You’ll get to understand, is this an industry that fits you? It’ll help inform you and develop preliminary questions to ask the owner during that initial interview.
Best Practice #3 Follow correct interview meeting etiquette
Now, how do you conduct yourself on the actual day itself?
You can’t go wrong with etiquette.
Etiquette is simply an organized or proper way of doing things. It removes awkwardness, makes you appear polite and courteous, immediately setting you apart.
What are some things we consider good etiquette to practice in an initial meeting?
- Showing up on time
- Dressing appropriately to the meeting
- The buyer introducing themselves first (taking pressure away from the seller)
- Making a proper buyer self-introduction (keeping it under 5 minutes)
- Disclosing your level of preparation (informing the seller of your M&A team)
- Being mindful of tone and being sure to affirm the owner
- Allowing the seller to ask you questions
Following the advice above allows the buyer to set the tone for the meeting, provides the seller a chance to dispel nerves, sets the stage for an open dialogue, and gives the seller an idea of who they are dealing with.
Summary: On the day of the meeting, start by introducing yourself properly. This sets the tone for the meeting and puts the owner in a relaxed position potentially reducing stress and anxiety levels.
Bonus Best Practice: Questions to ask and those to avoid
The initial meeting is not the place to ask intrusive and potentially offensive questions. You’re here on a first date.
So you’re not going to be doing things like digging into the financials – questioning the price of the business or negotiating terms. Leave that for further stages such as the due diligence phase.
Remember, you want to keep the owner on good terms and eager to openly discuss their business. You don’t want to offend them and get them defensive. Keep your objectives (see best practice #1) in mind.
Questions you may ask include:
- Reasons for selling
- Growth strategies they advise
- Major risks from their perspective
- Owner level of involvement
- Who are their key people?
And other operations-related questions. It’s high-level questioning without needing extensive details; it’s still an interview after all. You simply want enough information to allow you to make an informed decision whether to proceed or stop now.
This initial meeting may last anywhere from 45 minutes to an hour. But you will get a sense about the business and whether you’d like to go on with discussions.
Whatever decision you make, it’s polite to let the seller know as soon as possible. If it’s a yes, then without making any commitment, let them know that you’d like to think about what you’ve discussed.
If the business doesn’t fit into your M&A investment plans, again, the courteous thing would be to inform the seller as soon as possible.
Sun Acquisitions boasts an experienced M&A team that can assist you with preparatory efforts whether you’d like to buy or are selling a business. Don’t hesitate to contact us.