2017-01-20 Companies Are Bought, Not Sold

"Coffee is for closers"…..an immortal line from the movie Glengarry Glen Ross.

Not long ago, sales aptitude was measured by one’s ability to listen, overcome objections, and leave the buyer with no logical choice but to buy your wares. Generations of successful salesmen flourished using the vaunted Xerox selling regimen. If they didn’t fend off five sets of objections before giving up, they weren’t doing their job.

Unfortunately (or, rather, fortunately), that type of hard sell doesn’t work in the world of M&A. Acquirers won’t suffer sellers (or their advisors) attempting to overcome their resistance like a car salesman. Experienced buyers have well-defined parameters for their acquisition activity, and seek acquisitions typically to solve a particular need, such as patching an intellectual property deficiency, gaining new customers, or enhancing their suite of products/services. If you are selling your company, buyers will usually give you a chance to briefly describe your company, but if you want a full hearing, you need to tell the buyer why your company would be a good fit.

This requires a bit of homework before making the approach and employing a few vital tactics:

• For each potential buyer, sellers should seek to fill the gap: Do an assessment of where and in what way your competitors are lacking. Try to be the “buy” in a competitor’s build-or-buy decision. That worked well for one of Intuit’s acquisitions, Check, a mobile payments company. Intuit’s Mint and Quicken customers wanted bill pay functionality as part of the overall solution. After developing the technology proved harder than they had thought, Intuit bought Check to bring that feature to market faster.
• Get your company on the radar of potential buyers, well in advance of a sale. Shrewd CEOs will get to know the key players in their industry, meeting them at industry events and using their contacts to gain an opportunity to show their product. Companies that cultivate an early relationship with potential buyers have a substantially higher probability of being acquired than companies that are introduced to the corporate development team cold.
• Finally, be sure to understand the key metrics that drive acquisitions in your industry and use them in the management of your own company. Pay attention to the rationale acquirers give when they announce a deal and the pro forma impact it will have on KPIs. When Datalogix (acquired by Oracle) acquired Spire Marketing, a shopper analytics company, they cited Spire’s relationship with 24 regional supermarket retailers who had a combined 30 million households in their database, or approximately one third of all U.S. households. Whatever your industry, manage your company in such a way that the acquirer sees you as immediately incremental to the variables they use to evaluate their business.

While it may seem counterintuitive, selling your company is very different than selling your product or service. Attracting the right buyer entails a long sales cycle, and the highest chance for success comes from positioning yourself such that when the timing is right, you’ll get the call.

About Berkery Noyes

Berkery Noyes is an independent investment bank that provides M&A advisory and financial consulting services to middle market companies in the information and technology industries. The firm offers skilled transaction management to publicly traded and privately held businesses and private equity groups in both sell-side and buy-side transactions. Berkery Noyes has managed over 500 transactions, ranging from several million to more than four billion dollars in value.

About Martin Magida

Martin Magida is a Managing Director at Berkery Noyes, where he primarily assists clients with raising growth capital in the debt and equity markets. He also provides M&A advisory services to companies throughout the middle market. Martin holds a BA in Political Science from Union College and an MBA in Finance from the Leonard N. Stern School of Business at New York University, and is a Chartered Financial Analyst.