Mergers and Acquisitions For Dummies (36 page)

But that's just the beginning. Here are a few more guidelines that can help you make the most of your call:

‘
Fess up.
Simply saying, “I know you get calls like this one all the time” is a great way to acknowledge that you understand and respect the Seller's situation.

Keep it conversational.
Be willing to steer away from business. Talk about sports, the owner's kids, your kids, your crazy neighbor, music, travel, anything. If you show genuine interest, you show you're a real person, not just someone reading a script and dialing for dollars.

The key word here is
genuine.
You have to truly enjoy these conversations. If the talk eventually becomes a serious acquisition conversation that leads to a real deal (see the later section “You're having a serious conversation! What now?”), you need to have a rapport with that business owner during the process and perhaps after (if the owner is staying on board as an employee), and faked camaraderie is no way to achieve that. You and the owner have to play well together for real.

Get the other person to talk.
You don't want to have a one-sided conversation; you want the other side's input. A great technique is to simply tell the owner your
acquisition thesis
(your idea for combining the businesses) and ask whether it makes sense. Get her opinions on this thesis and let her showcase her expertise.

Be honest.
If an owner asks, “Are you looking to buy my company? I'm not interested in selling,” simply reply with the truth: Yes, you're acquisition minded. You can add the caveat that specific talk of an acquisition is premature because you don't know her interest or even whether the company would be a right fit. All of that is true. That's why you have these conversations: to determine interest and fit.

Ask killer questions.
These big questions quite often start a deluge of information and sometimes end in an M&A transaction:

• What do you want to do?

• What are your goals?

• Where do you want to take the business?

These questions may seem simple, and they are, but if you pose them in the right way, they can get someone to go beyond her current day-in, day-out grind at the company and get talking about life after work. When you're trying to buy a company, understanding what the owner wants to do in retirement and when she is thinking of retiring are some of the most important bits of data you can collect.

If you can successfully engage an owner in a conversation, at a minimum you've made a solid business contact who will take your call in the future. At best, you have a viable acquisition target.

Not all calls go swimmingly. Despite your best intentions, some owners hang up on you (sometimes after telling you exactly what to do with your acquisition-minded company). Be prepared to handle rejection.

Using a successful script

The following is the basic script that I work from when I make acquisition search calls. As with the script I use when I'm selling a business (see “Following a script that works” earlier in the chapter), I rarely read this text verbatim. Instead, it sets up the flow of the basic information I want to convey during the initial call.

[Owner's name], my name is Bill Snow. I'm with a business advisory and investment banking firm.

One of my clients has asked me to help them grow their business. I know you probably get calls like this all time, but I was hoping to talk with you for a minute, explain their vision and plan, where they want to go, opportunities that we see to create a lot of value, and see if anything holds water for you.

• My client is a profitable, midmarket telecommunications company.

• They're led by former top execs from leading telecommunications companies.

• They have deep industry knowledge, experience, and connections.

• Their company currently has strong customer relations with large companies, federal and state governments, universities, and mid- market companies.

• We believe there is a compelling story to combine with other well-run companies in a few seemingly unrelated industries, which include data centers, software, and alarm, fire, and security systems.

They'd like to build off of and leverage further their existing sales relationships and add other products to the mix. We believe the combination of my client's collective experience coupled with the management expertise of companies they merge with, or otherwise partner with, could build a billion-dollar revenue company, which would obviously create quite a bit of value for those who are involved. I'd like to talk with you to explore whether our notions might fit with your goals.

As I note earlier in the chapter, don't worry about your script being grammatically perfect. You're not going to read it verbatim. The goal is to pique someone's interest and have a conversation about the thesis, whether that thesis makes sense to the business, and eventually, whether the business owner is interested in exploring a deal.

Not every call results in a great conversation; that's why your target list (which I cover earlier in the chapter) needs to be large enough. But if you have enough conversations, are willing to immerse yourself in the calls and communicate, and are a genuine person with an approachable personality, you can find success with this technique. Believe me, it works much better than the usual “We have money . . . .” spiel.

You're having a serious conversation! What now?

If you segue into a conversation about doing a deal, start asking questions! Ask about the business: what it does, its history, the revenues, the EBITDA, how the company is incorporated. You can also inquire about customer mix, how the company goes to market, and who its vendors are. Of course, you've already researched this information to some extent; the idea here is to get the owner to start providing more detail to augment that research.

An owner eventually pulls back a bit as you ask her for more and more information. When that happens, suggest enacting a confidentiality agreement (CA) between your respective firms. (Check out Chapter 7 for details on confidentiality.) If you've planned ahead, you should have a CA ready that you can e-mail to the owner.

I'm also a big fan of managing the expectations of others, so lay out the next steps. Tell the owner that after the CA, you want to review the company's financials (income statement, balance sheet, and if handy, cash flow statement), and then set up a visit at his office/factory/facility if everything is “green light go.” See Chapter 10 for more information about these early face-to-face meetings.

After the owner has sent you the financials, and if the company's numbers look like they meet your criteria, set up a meeting with the owner. If the owner asks for your intentions prior to setting a meeting, submit an indication of interest (which I cover in Chapter 9).