Know who is ultimately making the acquirer's purchase decision
A common mistake made by sellers of private companies is they don’t understand early enough in the exit process who at the acquirer will be making the ultimate go or no go decision to buy their business.
Here are two common scenarios;
- the acquirer is a strategic player in your industry (maybe a direct competitor) and sees value in adding your business to theirs. Your point of contact is that company’s CEO or it might be a divisional or group President and they are very excited to acquire you.
- The acquirer is a private equity firm interested in adding your business to their portfolio. Your point of contact is a Principal or Partner of the firm.
Will the ultimate decision to acquire your company be made by your point of contact? The answer in many cases is no. The CEO of the strategic acquirer may report to their company owner or to a Board of Directors (or shareholders). The divisional or group CEO you’re working with has a boss either at their corporate level or at the Board Chairman level. Then there is most likely a CFO, finance committee or M&A committee that will have a great deal of sway in the deal. And for the Private Equity firm, that Partner has other Partners and most likely a deal committee that must approve all deals. And with these scenarios, if either requires external financing to support them acquiring your company, their financing partner will have a go or no go say.
The reason it’s important to know who ultimately will make the acquisition decision is that the people you need to initially excite to acquire your business may not be the ones you have to ultimately convince to acquire your company. This means that through the entire exit process (or campaign as we manage it with our clients), it’s critical to build and deliver an exit narrative that will be compelling for all acquirer decision makers and in sharing of numbers and information about your business, it’s important to prepare and share this information knowing how it will be viewed by not just those you’re working directly with, but those they must in turn work with behind the scenes. You want to help them sell the deal to those they need to convince. Your point of contact is your sponsor, but you want to help them in turn excite and convince those that will have the final say.
Getting to your euphoric exit event won’t come without pre-planning. Ensure your exit planning campaign includes understanding the decision making chain of the acquirer as it could be the difference between not having a successful exit event or having a euphoric one.
