Top M&A Tricks Acquirers Use
Before any discussions with a potential buyer, we suggest reviewing these common tricks seen when buyers try to acquire companies. It is important to recognize these buyer tactics and get help as soon as possible.
- Letter in the mail. It is relatively common to receive letters in the mail from "interested parties" or companies that represent "interested parties." Serious buyers usually don't send letters. Unless you have heard of the company that is sending you the letter, most likely it is either:
- a private equity group that is looking for a really good deal in your industry and is sending this letter to hundreds of companies, or
- an M&A firm that is trying to trick you into talking to them and selling their services
- "What is your price?" That is the million dollar question and it's what every buyer wants to know. There is a right way and a wrong way to answer this question and most business owners answer it the wrong way.
- "This offer will self-destruct in 5 days." If a real-buyer has given you an offer and says you have a certain number of days to accept or the offer disappears, unless it is really a great offer, don't be tempted to accept it. The buyer just doesn't want you to shop around because they know you will get an offer for more. If the buyer truly wants your company, they will usually extend the deadline.
- "You can use an advisor or talk to other buyers, but we may not be interested anymore." Our rule-of-thumb is that an only buyer that knows they are the only buyer will give you an offer no more than half of what you are worth. If you hear the above line, they are telling you that they don't want you to find out what your company is worth because it will become more expensive to them.
- Ask and you shall receive. Experienced buyers are great at asking a lot of questions and receiving all the answers. Every CEO walks into their first meeting with a buyer with their "ice wall" that slowly melts throughout the conversation. You may be the best negotiator around, but without even realizing it, you will be spilling the beans to an experienced dealmaker. Have an objective party or M&A advisor present in any discussions and don't give any information without that objective party first reviewing it.
- Let's talk over drinks or dinner. First, it isn't advisable to even have face-to-face meetings if you are going to handle the negotiations yourself. Every good dealmaker on the buyers' side knows how to read how eager a CEO is to sell their company. Even if the seller shows up with their "ice wall," it is easy to see through it and it slowly melts. Add a few drinks to that and the "ice wall" melts even more quickly. If you are going to represent yourself, the phone is the best way to hide your body language.
An experienced corporate development executive has the upper-hand against a small business CEO and can move the deal quickly in their favor. If you don't have an experienced M&A professional (not your attorney or CPA), you will probably leave money on the table or reduce the chance of your deal actually closing. Contact us and we can discuss multiple ways we can help sell your company.