Mergers and Acquisitions For Dummies (51 page)

An enthusiastic send off

The indication will then conclude with enthusiastic, “Let's do a deal!” language. It's a call to action. When I take over the world, I'll mandate that every bit of correspondence conclude with an enthusiastic call to action.

Chapter 10

Ensuring Successful First Meetings between Buyer and Seller

In This Chapter

Exploring the benefits of face-to-face meetings

Organizing a management meeting

Presenting the company to Buyers

Getting ready for a facility tour

Gauging the effectiveness of a meeting

A
fter Buyer has reviewed the book (or
offering document
— see Chapter 8) and submitted an indication of interest (see Chapter 9), the next step is to meet with Seller's key management and/or ownership. The management meeting (run by Seller) provides a financial update (and any other pertinent updates) and allows a prospective Buyer to interact with Seller. It may even include a tour of the facility. Think of it as M&A dating.

In this chapter, I introduce you to meetings and more meetings all kinds of meetings.

Understanding the Importance of Meeting in Person

Over the years I have advised my clients that the management meetings effectively take the proceedings from black and white into Technicolor. A company described in a two-dimensional, black-and-white offering document suddenly becomes a living, breathing, three-dimensional entity when actual people meet face to face. The M&A process really comes alive.

Also, meeting in person rather than on a conference call, for example, gives you the chance to read the body language of the folks on the other side. Are they bored? Shifting in their seats? Playing with their smartphones? If you can't see someone, you can't observe body language.

Sellers shouldn't take a meeting with a potential Buyer until the Buyer indicates its interest in writing. Even a Seller who wasn't looking to sell and was contacted directly by a Buyer should refrain from meeting with the Buyer until the Buyer submits an indication of interest.

The following sections present a few reasons why personal meetings are so crucial.

The buyer gets to interact with key management

Not read about them, not talk to them on the phone, but meet face to face. Having a chance to engage in real-time interaction is far different from merely reading about people or processes. That's why people go on dates!

The “coming alive” aspect of the meeting phase manifests in the ability of one side to ask impromptu questions of the other side. Instead of merely reading a black-and-white book, Buyer gets the chance to engage in a discussion when a question or comment pops up.

Both sides perform due diligence on the other

Yes, Buyer does the vast majority of due diligence, but during the meeting phase Seller gets a chance to learn more about Buyer.

This step is keenly important if Seller is planning to stay involved with the business after closing. And even Sellers who plan to sell 100 percent of the business and retire often have a parental view of their employees: They want their people to continue to prosper and succeed.

Sellers (or their intermediaries) observe prospective Buyers at the management meetings and attempt to gauge which group has the best chance of continuing the business's success post-sale; who has the right skill sets to run the business; who has the ability to close a deal; and frankly, who they like. I know that criterion is subjective, and in most cases a high valuation trumps all other considerations, but sometimes doing a deal comes down to the more visceral “We didn't like them, let's go with the other guys.” (See the following section for more on chemistry between parties.)

Buyers should remember that Seller is speaking with other Buyers in most cases. As Buyer, don't take it for granted that Seller will choose you. Put your best foot forward!

The parties gauge chemistry

In other words, do Buyer and Seller play well together? Chemistry is another subjective concept. Both sides either like each other or have some sort of tension.

Keep in mind that the actions of one side or the other can affect how chemistry develops (or dies) at a meeting. For example, a Buyer once told me he was bringing a “consultant” to the management meeting. The “consultant” turned out to be the CEO of my client's main competitor! The Buyer didn't inform of us of this fact; we didn't know the true identity of the “consultant” until we exchanged business cards at the start of the meeting. My client immediately said he wasn't going to continue until the offending “consultant” left the meeting.

This moment turned out to be the high point of the day; the discussions turned contentious and heated. Needless to say, the Buyer and Seller had no chemistry, and any chance of a deal between both sides was effectively DOA.

Ironing Out Management Meeting Logistics

Although the purpose of the management meeting is for Seller to impart information to Buyer, Seller shouldn't forget the goal of the meeting: to eventually obtain a letter of intent (LOI) from Buyer.

Before the Buyer and Seller can get to the LOI (see Chapter 13 for more details), they need to go through the song-and-dance routine of the management meeting.

Seller's team should run the management meeting; Buyer is Seller's guest. Seller does a lot of talking, explaining, and updating. Buyer takes notes, occasionally interjecting with clarifying questions.

Assembling key players

Some combination of Seller's ownership and management should attend. Of course, who exactly that entails varies from company to company, but basically the attendees should encompass people who can answer questions about day-to-day operations, the current and future financing needs of the company, and decisions made at the board level. In some cases, one person can address all these aspects, but more often than not these three broad areas require multiple people. Seller should also have her intermediary in attendance. In fact, that person will probably play the role of the emcee for the meeting.

Buyers should bring the people responsible for making the final decision. This group may include the president or CEO, the CFO, and sundry corporate development people. People who aren't decision-makers (or influencers to the decision-makers) shouldn't attend. They aren't needed at this juncture. If Buyer is utilizing outside financing, allowing the financing source to attend the management meeting may be permissible. Lastly, if Buyer has an intermediary, that intermediary will probably attend the meeting.

If occasional detailed information (say, the new marketing plan) needs discussing, bringing in a specific person (in this case, the VP of marketing) to cover just that issue is okay. But that's the only part of the meeting that person is involved in.