Buyers come in all shapes and sizes, but those with the motivation and resources to execute a deal are well-organized, experienced, and very, very busy. Typically, their Corporate Development (CorpDev) departments have a detailed evaluation process with a series of defined hurdles that must be cleared before they gain approval to expend company resources and submit a bid. Successfully selling a company to such buyers requires equal parts science and art. The “science” is making sure all the information about the seller is exhaustive, accurate, and substantiated — including but not limited to financial projections. The “art” is presenting this information in a way that catches buyers’ attention, is easy for them to understand and digest, and fits comfortably within their evaluation process.
Over the past 22 years, we’ve developed a keen sense for what will attract potential buyers to a process, all other things being equal. Here are a few key learnings we incorporate, in most circumstances, when serving our clients:
- The anonymous “Teaser” needs to clearly describe the company’s product or service, identify the customer segment, show most recent revenue and EBITDA, and make a reasonable projection of future growth. This allows buyers to quickly decide whether the target meets their strategic/financial investment criteria.
- The Teaser should be accompanied by an NDA so buyers can immediately sign and return the NDA if they would like to see the Confidential Information Memorandum (CIM). You do not want them wasting their time separately requesting and receiving an NDA once their appetite is whetted. And the sellers should have an NDA process that allows certain commonly requested changes (e.g., reducing the term from 3 years to 2) without burning up time and money requiring that it be run through a legal review.
- The CIM should provide enough information in sufficient detail so buyers can do their internal preliminary analysis and financial modeling. This allows the CorpDev team to efficiently get the bid proposal up the chain for approval without being bogged down in asking for more data.
- The CIM should also contain a schedule for the sales process, including planned dates for Indications of Interest, Management Presentations, and Letters of Intent, allowing the buyers to slot the project into their internal resource plans.
- The Virtual Data Room needs to be extensively populated at the outset of buyer due diligence; buyers should have to ask for very few, if any, additional documents.
While this list could go on for pages, suffice it to say that a key function of providing effective M&A advisory services involves anticipating buyers’ needs and making their time more efficient and productive. The result is an increased probability of having a successful transaction.
Have a great day everyone.
Managing Director, Aerospace