Maintaining Optimism and Focus During Challenging Transactions
In our line of work, we often guide clients through transactions culminating in joyous celebrations and resounding appreciation. However, the journey doesn't always proceed smoothly. Even the best transactions have setbacks. On occasion, one transaction may have several.
Take, for instance, a few years ago when we partnered with a client boasting a highly profitable BPO business. We engaged a buyer with solid financing ready to acquire our client's company, along with another entity. With due diligence nearing its end and funds in hand, optimism ran high for a swift closure. The wiring information for the closing funds had been exchanged.
Then, a hiccup emerged regarding the buyer's ability to acquire the second target company, and regrettably, the financing was contingent on both acquisitions. The buyer backed out of our deal because the other one fell apart—literally nothing we could do.
Undeterred, we regrouped, swiftly returned to the market, and secured an LOI from a substantial private equity fund that seemed like an ideal fit for our client. Once again, we navigated through due diligence. However, the fund's process and people proved to be quite demanding, subjecting us to an unusually rigorous due diligence process. Just when we thought we were on the cusp of success, the fund withdrew. This time, it was due to one decision-maker in the fund not liking one slice of the seller's revenue. It was a decision maker we had yet to meet or know could impact the deal. This second setback profoundly shook our client's confidence in the path ahead. We assured the client about the solid quantitative data supporting the historical performance and reassured them of their company's inherent value and marketability.
Back to the drawing board we went, and this time, we identified a strategic buyer who quickly identified what made our client's company genuinely exceptional. An LOI was drawn up, and due diligence proceeded immediately. Often, the strategic buyer who comprehends the business and can instantly enhance its value is the optimal choice. The transaction reached a successful conclusion, and our clients realized the full value of their company – they ultimately sold for the highest price on the third try.
The secret to our client's appeal to three distinct buyers and the eventual success of the deal lay in their robust marketing and sales engine and the owner's unwavering commitment to our ability to get a deal done. They were steadfast in their commitment to run the business through (not to) the finish line. And, most of all, they were patient in the process.
Here are a few key takeaways:
- Be Patient: Even the best deals hit speed bumps, roadblocks, or setbacks. M&A transactions are all about risk, and because the buyer can only see some of the risks pre-LOI in a private company, deals can and do fall apart in due diligence. Be patient and run through (not to) the finish line.
- Maintain a Full Pipeline: your clients may come and go for various reasons, making it imperative to replenish your new business pipeline continually. Buyers are perpetually seeking to reduce risk in transactions, and a full pipeline serves as a valuable insurance policy. It demonstrates that the business has built-in resilience and can withstand clients' departure. Because deals take time, you are bound to lose a client during the process. Be sure your pipeline is ready and available to add clients at the same time. Always be closing.
- Stay Focused:The process of selling your company can be a distracting endeavor. We prepare our clients for a transaction by addressing due diligence items early, presenting comprehensive (and clean) financials, and minimizing interactions with potential buyers until they are thoroughly vetted. Managing your business as usual can be a challenge during this process. The most successful transactions are those where the seller trusts their advisor to manage the process while ensuring that the business continues to flourish.
