Most business owners of privately held companies see mergers and acquisitions as a one-way street. They seek out M&A options only when they are ready to sell their company. In truth, M&As can provide a number of innovative options to expand a business to new heights without selling the company in its entirety.
Owners who are innovative and flexible may be surprised how willing buyers are to craft a transaction that meets the seller's goals and objectives. Most buyers also value the seller's contributions to the company and prefer that owners continue to play a role in the organization after a deal closes. After all, the business owner built the company into the successful operation that attracted the buyer in the first place. The buyer needs the expertise and connections the business owner has cultivated over time to continue building the company.
Not long ago, we worked with a mobile telecom company and helped the owner sell 88 franchise stores. The seller wasn't looking to cut ties with his business. Though he desired some liquidity to enjoy life, he also had plans for the company and wanted to remain involved in its future. During the negotiations, his innovation allowed him to buy back 40 percent of the company. A win-win for him--both a substantial financial windfall and a major shareholding in the company. Most important, he was able to continue doing what he loved most, which was work with the new owners to expand the company.
Here are three questions you need to ask yourself before a potential M&A to foster the same success:
1. What are your personal and professional objectives?
Be creative. Think about what you want your company to look like three, five, and 10 years from now. Be honest. Do you want or need to be involved in the company to accomplish this objective?
In tandem, think about your personal life three, five, and 10 years from now. Does it include more time with family? Is health an issue? How much money do you need to live the lifestyle you want to enjoy? Do you need to sell part or all of the company to reach these personal goals?
Write down your answers and determine if your current plan will enable you to reach your objectives.
2. What do you do best?
When you launched your business, you did it all. What did you do then that you enjoyed most? It is probably what you do best. Maybe it is selling or designing new products and services. Whatever it may be, identify which part of your business you enjoy most and do well and determine if it's what you would like to continue to do after the M&A transaction is completed.
Investors will need your expertise and your experience to continue building the company. However, you and your investors will probably be able to expand the company faster if your contributions reside in the areas where you feel most comfortable doing what you enjoy most.
Imagine how exciting it could be to take some cash off the table now and spend the next few years of your career doing exactly what you enjoyed the most about your business while you help your company reach new heights. It can happen.
3. Who do you think would be your perfect investor?
Today, approximately $1.1 trillion is available from investment sources. There are literally thousands of investment firms, banks, and family funds that you could consider. Business owners are in the driver's seat in today's market. Before you begin the M&A process, envision the perfect investor--his or her qualities and contributions and how he or she can help you meet your personal and professional objectives.
Is price the most important thing to you? How important is it to you to play a role in the company after the deal is done? How has the investor treated longtime employees in prior transactions? What types of investments has the investor engaged in previously? Is he or she a long-term investor or a firm that is looking to flip the company for a profit? There are hundreds of questions you should ask yourself to create a description of the perfect investor for you and your company.
When you meet with an investment banker, it is important to share this information with him or her so he or she can understand your goals. The more specific you can be, the easier it will be for your banker to identify investors who can meet your goals and allow you to live the life you want after the deal is done. The key to getting what you want out of an M&A transaction is to have a clear picture regarding what you want to achieve personally and professionally. If you can identify your goals, establish what you do best and enjoy most, and describe the perfect investor, you are well on your way to a healthy M&A experience.