Selling the Future
If you talk to most acquirers of companies, or an M&A specialist working for an acquirer, you will soon hear that they pay for the past, buy the current and the future is theirs to exploit. They will never pay for the future!
So how does one achieve this?
How do you get an acquirer to pay for the future?
1. It’s About Choice
The first non-negotiable is (obviously) choice. While you have choice, and acquirers understand that you are not only speaking to them but also to other prospects, your negotiating power is immediately increased.
2. Uniqueness and Scarcity
The next advantage (although not entirely essential) is scarcity. If your business is unique and represents a scarce acquisition opportunity, then there is a cost to an acquirer of buying your business, but also a significant cost to an acquirer of not buying your business.
Businesses like yours do not become available for acquisition every day, so the acquirer needs to know that the process you are running will result in a sale.
Knowing this will catalyse action on their part as they realise what’s at stake: are they going to be the one, or are they going to miss out?
3. Selling Synergy
Finally, the key tactic to selling the future is a synergy business plan.
When you originally presented your business forecast to the market, you should have been quite conservative about the future of your business if it were to remain in your hands.
This was enough to get the prospective acquirers to the table, but now we need to show them what the forecast will look like if the business is in their hands. Here are a few questions we could ask;
– How will the introduction of your products to their customers impact your business?
– How will their products sell to your client base?
– What operational synergies exist?
If you did a good job of asking questions when you first met the acquirer, then you will know what to put into your synergy business plan.
When you present the synergy business plan to the prospective acquirer, you need to tread carefully – look again at the first paragraph above.
He/she does not want to pay for the future, but you can present to them that they are likely to do very well with the business post transaction. If they really want the business, and do not want someone else (a competitor perhaps) to acquire it, then it would make sense to increase their offer.
You need to get the acquirer to focus on their motives for acquiring, rather than a technical valuation focused on a multiple of earnings. In that way, you do sell the future!
By Rick Grantham, Executive at Deal Leaders Africa