Almost every business owner in the US today has experienced regular, recurring calls by people who say they have interest in the purchase of their company. While it is always prudent to keep names and numbers of such callers, it is often not worth the time and effort to thoroughly follow up. We want to help business owners to obtain truly helpful information from such inquiries, and, potentially to identify the occasional buyers who come along, who may become great premium buyers when the time is right.
As such buyers call, always be cautious before providing information. It is fine to say, “We get these calls regularly, and we are always willing to listen, but it’s probably not terribly likely just now. Tell me a little about yourself, and about your interest, so I can capture appropriate data in case we might contact you later.” Here are some important questions to ask:
Who is your inquiry on behalf of? Are you the potential buyer of my company, or are you working as an intermediary for some other party? (If they say they’re an intermediary, ask who, specifically, they are working for.) Identify the name of the prospective buyer and what type of company they are. If the caller is an intermediary, and he won’t share the name of a buyer company he is working for, don’t continue discussions. (He is looking for a seller that he can discuss with the world, with hopes that someone may pay him for the find.)
What makes you think we are desirable as an acquisition candidate? (The more specific in detail they are about their thoughts about potential “fit”, the better.)
If the caller is shopping around for multiple buy-side clients, even if he gives you names, don’t tell him much. That sort of caller will potentially go out with your company’s name, and whatever information they can gather, and troll for other buyers, by calling other companies in your industry. Just take the caller’s contact information, get whatever information you can about buyers they represent, and promise to be back in touch if you decide to consider sale in the future.
If the suitor seems to be a likely bona fide prospect, who you feel may really know something about you, and may want a company like yours, tell them you’ll be glad to give it some thought, and get back to them. Then, hire professional help. Stop before conducting detailed discussions yourself. Have a representative call them, get a specific, signed non-disclosure agreement, and then probe further. Using professional help will, in every case, pay off. A professional facilitator will be able to control confidentiality, will create a sense of competition, and will be able to ensure beginning on the right foot. Suddenly, you will be seen as big enough, and desirable enough in the marketplace, to have established a professional process, to help you with this type of inquiry. Buyers will take the opportunity far more seriously.
If you aren’t interested in pursuing sale now with the calling suitor, but you still believe this could be a valuable connection in the future, take the following steps:
a) Tell them this is probably not the right time, but that you find their interest intriguing, and you’ll keep them in mind.
b) Tell them if they are serious, and would like to move toward further discussions in the future, that it would be helpful for them to provide you with additional information about their organization. (I have seen buyers submit copies of their annual reports, documents from strategic planning sessions, and even details of prior acquisitions that are quite helpful if you decide to talk to them later).
c) If you’re bold and capable, consider asking how they price acquisitions. (It’s hard to get meaningful answers, but we ask all the time, and we often gain very valuable information).
One other fine point about identification of great buyers: Be alert for trends in your industry, where big players in other business segments may be looking to add businesses like yours. They may want manufacturing or service capability, or perhaps they seek to add customer bases like yours to their mix.
Sellers often think they already know the best buyers for their company, but years of experience has taught us that they are usually wrong. Often they are thinking of competitors, or sometimes customers. Neither are usually the best. The buyer who is most likely to pay a larger amount for the connection with you is usually the buyer who is getting something he doesn’t already have, with his purchase. He gets either a product, or a skill set, or talent, or a type of customer access that he wants very much, but that he didn’t have before. Be alert to those off-center acquisitions that may be happening in your industry, and capture information for your “someday” buyer files.
The more you practice the capable study of would-be buyers, the better you get at such probing, and the more valuable your database becomes, for the day you may be ready to consider sale. Also, the time may come when you are approached by the perfect fit. When that happens, hire help, create competition, and go for it! You may achieve the grand-slam homerun of a lifetime!
Article written by Debbie Douglas, Managing Director at Douglas Group.