Mergers and Acquisitions For Dummies (35 page)
Read Mergers and Acquisitions For Dummies Online
Authors: Bill Snow
Well-known brand names
Biggest bang for buck for Buyer is someone who can move production to own facility, which would result in $15 million of contribution
Company is profitable, roughly $3.5 million in EBITDA
Owner is in his 80s, in the midst of estate planning, hence the interest in selling â would keep it otherwise
In this case, the basics of this deal were always in front of me and my specific words were based on the flow of conversation I had with potential Buyers.
Often Seller has one or a couple of top targets he believes will likely have the most interest. If you have top targets, don't call them right out of the chute. Work out the inevitable delivery kinks in your script on lower-ranking targets. After you smooth out your delivery, you can then call your top targets more confidently.
Just in case you get cut off when leaving a message, always start by stating your name and number at the beginning of your message. When leaving a message, speak slowly and clearly, especially when stating your name and leaving your number. This point is especially important if your name is unusual, has a strange spelling, or is simply difficult to pick up (see the nearby sidebar). Nothing's wrong with stating your name and number at the beginning of a message and again at the end.
Don't rattle off your phone number is a rapid fire, staccato fashion. I've heard many voice mails were the caller spoke at a nice, relaxed pace until he got to his phone number, which he sped through so fast I had to replay the message multiple times before I could decipher it. Make calling you back easy for the recipient of your message.
A problem of frequency
As you can see from the cover of this book, my name, Bill Snow, is simple and short. But that's often a problem when I'm leaving a voice mail. My name has only two syllables total, making it rather abrupt and quick (much like my personality, according to friends). Worse, the last sound is a vowel, which is often difficult to pick up because vowel sounds trail off while consonants have a hard stop.
Why does this issue matter? Early in my career, I was constantly puzzled and amused when people returning my call would ask for (or leave a voice mail for) someone named “Bill Stone” or “Bill Snell,” or my favorite, “Mr. Sow.” Sao, Snau, and Snoo also came up.
So what caused this problem? It was the telephone. Telephones have a far smaller frequency range than the human ear. The typical, non-Pete Townshend human ear can hear a range of roughly 20 to 20,000 cycles per second. The average telephone only transmits frequencies between about 350 to 3,500 cycles per second. That means telephones eliminate the high and low ranges of sound, thus rendering an otherwise clear-speaking person slightly garbled and unclear.
To remedy this discrepancy, I simply began to spell my name (thankfully, it's short) and sometimes added the line, “Snow, like the white stuff in winter.”
Most people immediately got it. “Oh! Snow! I thought you were saying Sow!” Well, except for one lady who, after I gave her my usual “like the white stuff in winter” line, paused for a couple of awkward seconds before sheepishly saying, “Sand?”
Sellers, avoid corporate purgatory
If you're calling on a publicly listed company, never, ever, upon pain of death utter the word
investment,
as in “I'm an investment banker” or “I have an investment opportunity.” People hate investment bankers in the wake of the recent economic setback, but more to the point, if you say “investment” the person on the other end hears only “invest” and before you can finish your comment , the line is ringing. That means you've just been sent to corporate purgatory: the investor relations department.
These folks' jobs are to interact with investors. But an odd thing happens when your call descends into this dark corporate nether region: Nothing. Investor relation-types seem to be afraid of a ringing phone because they rarely answer it. They like to leave cheerful messages saying that your call is important and that they'll get back to you shortly, but that's usually a ruse. They don't return calls. Occasionally, you run across a chatty investor relations-type who answers the phone. He's probably new and doesn't know better.
Easy Does It: Contacting Sellers
Contacting Sellers is easy. You pick up the phone and call. What's tricky is having a meaningful conversation with a Seller.
When contacting a Seller, you want to speak with the owner, not an executive (even if it's the president). A high-ranking executive is only an influencer. You need to speak with the actual owner.
Sellers don't know they're Sellers. Sellers often don't even want to sell; you call them “Sellers” simply because you hope they'll take that role. What they currently are are business owners deluged by calls, e-mails, and letters offering to buy their companies. These communications all say the same thing:
We have money, we have industry experience, we're different, and we want to buy your company.
The sad fact is that most would-be Buyers don't realize they say the same thing. In a typical week, I receive two or three phone calls and another three to five e-mails (often more) from Buyers. And I'm not even a business owner; I'm just an investment banker.
As Buyer, you have to understand that you're a commodity to Seller. And the more profitable the Seller, the more that statement is true. Sorry if that sounds harsh, but it's the truth. Those constant calls, e-mails, and letters simply become background noise to a business owner, so you have to know how to cut through the eardrum buzz.
Having a meaningful conversation with a business owner means grabbing that owner's attention and ingratiating yourself to that owner. The following sections give you some pointers on doing just that.
Sending an e-mail or a letter rarely helps you make solid contact with a Seller. Those communications are passive and easy for Sellers to throw in the recycle bin (virtual or otherwise). For best results, pick up the phone and have a conversation.
If a company that isn't for sale enters into a sale discussion as a result of an overture from a Buyer, that Seller may be in a strong-enough position to negotiate a deal with Buyer. After all, Seller can easily walk away because Seller wasn't planning to sell! Seller probably hasn't retained a full-service investment banker at this point â an offering document (see Chapter 8) isn't being compiled, research isn't being conducted â so the expense to Seller is relatively minimal.
Getting the call off on the right foot
Similar to
Fight Club,
the first rule of buying someone else's company is you don't talk about buying someone else's company! If you immediately come out and say, “We want to buy your firm,” your approach is no different than the myriad other Buyers who have approached this owner.