We’re embarking upon a BLP Series on the M&A Sales Process. Much of this, if not all, you already know. It’s not that I’m trying to talk down to anyone, but it’s worth repeating and seeing the process detailed in one place. It’s a multi-part series that we will be dispersing among the other BLP blogs/newsletters.
The topics, which you can pick and choose to review, are:
- Due Diligence and Due Diligence Materials
- Customer reference calls, or the “market survey”
- Risk Factors
- Sales Memorandum
- Investment or Company Highlights
- Risk Factors
- Business Overview
- Financial Projections
- Executive Summary
- Company Presentation
- Blast email vs. Direct Calls
- Assembling the Call List
- Scripting the call
- Researching potential buyers;
- Company-Buyer Meetings
- Knowing when you’ve got a fish on the line
- Myths and reality wrt creating a competitive situation
- But, what if I have only one buyer?
The “Preparation List” is extensive for a reason: Your buyers won’t take you seriously if you’re not thoroughly well prepared and informed. New clients are eager to get out into market immediately after the engagement letter is signed. To a client, we always find it necessary to slow them down and reign them in. A big reason for and benefit of the preparation is that we get to know you and your business thoroughly, through hours and hours, days and days of discussion and Q&A. This is crucial to our ability to represent you.When we show up, often a draft business plan is available, though it may be years old. We scrub the business plan, and take much material from that plan.
Preparation can take one to three months. If we know the Company well, and have done transactions for them in the past, that time can be severely compacted. I’ve completed a sales memorandum and presentation in as little as a week.
If we’re starting from scratch, assume the preparation of materials will take three months from start to finish. It’s not the writing that’s all consuming, it’s the getting to know you. Do not underestimate the importance of this time period.
In terms of execution, gathering the information to make the call list is a prodigious effort. If you’re going to be professional, you want to know a fair amount about the potential buyer before you start: income statement, balance sheet, management team, addresses and phone numbers.
Once you start calling, you try to keep all the potential buyers on the same timeline, but that is many times not possible.
When you’re looking for a buyer for your Company, you’re looking for that needle in a haystack. The right buyer, at the right price is out there. It’s finding them, and getting them to the table. In the sales process, it is a process, and persistence in omniscience.
If you didn’t read the WSJ piece on IPO’s it’s worth taking a look at. The gist of it is that most, or close to 84% of today’s IPOs are recapitalizations. It’s LBO’s and restructurings going public, again. So the money is going around the same race track, but not building anything. There’s no innovation and little growth. But there is size, which is what underwriters want. Only 16% of the IPO’s are situations where growth is being funded. That will not spur the economy forward. By way of contrast, in 1999 69% of the IPOs were tech related.
In “BLP’s Week of August 19th in Review” we misquoted HP’s share price. A reader, who owns options in Hewlett-Packard (HPQ: NYSE), pointed out that we were quoting Helmerich & Payne (HP: NYSE), which is now trading at $63 per share. HPQ is trading, this morning, at $21.99 per share. Oops. That’s $41 per share of disappointment!
We very much appreciate being pointed to factual errors in the newsletter, and will alert our other readers, as soon as possible, to these errors.
If any of our readers are interested in proofing the newsletter before it goes to press, please let us know. We would be most appreciative. Just beware, as it is a very time sensitive and cumbersome process.
Where is Bill Luke when you need him? Bill was a former partner, and the world’s best proof reader. Bill is now retired.