At Accelerated Manufacturing Brokers, Inc. we often joke that we are the Match.com for buyers and sellers of manufacturing companies.
But truth be told, preparing for a “first visit” from a prospective buyer is like getting ready for a first date. You are going to have anxiety and butterflies. You’re going to worry about what to say, and what not to say. Short of recommending yoga and relaxation breathing techniques, the information below should calm your nerves as this day approaches.
Have a Game Plan
What to tell the employees about prospective buyers visiting the building is always a concern. To mitigate this anxiety, decide in advance whom the broker will “be.” We’ve used an insurance agent, the accountant, a sales rep with a potential new client, to name a few. Telling the staff that the broker is a sales rep with a potential new client works well because the staff will likely see the broker several times with different potential buyers.
Your Business is the Prize
We are currently in a “seller’s market,” meaning there are more buyers than sellers. Best case scenario, whenever possible, we strive to have at least two buyers from which the seller can choose. Most sellers look for someone they could work with for a period of time, and one who they believe is trustworthy to maintain the legacy. As much as the buyer is “sizing up” the business, the seller needs to assume a similar position.
A good prospective buyer will have a lot of questions - and the seller will likely do a lot of the answering. The buyer should have read the offering memorandum and reviewed the financials. The most frequently asked questions would seek clarification on the operation & financials. On the ops side, be prepared for topics such as customer concentration, length of customer relationships, industries served, current capacity, the seller’s roles on a daily basis, who else in the company does what you do, sales structure, supply chain, etc.
On the financial side, there are buyers who are initially most interested in the business; others I’ve observed have done a deep dive on the financial statements and have a litany of questions even at this early stage. For more information on prospective buyer questions, click on this link: 101 Questions a Buyer Should Ask
Be Candid and Cautious
As a seller, acknowledge the shortcomings of the business, but immediately follow up with what is presently being done to address the issue or opportunities the buyer could pursue.
Be Ready For Leading Questions
The goal is to make these meetings as productive as possible. Understanding that the prospective buyer is equally nervous, he may forget to ask certain questions, which he’ll remember as soon as he pulls out of your parking lot. Leading questions from the advisor to the seller on behalf of the buyer bring important information to the forefront, minimizing the number of follow-up questions.
The Buyer Will Want a Tour of the Offices And Plant
This is customary and necessary and usually follows the initial Q&A. Gauge the level of technical detail to your audience, but also don’t gloss over systems, recent CapEx improvements, the duplicity of machine tools, worker’s comp history (especially if the incidents are low in number!), maintenance process and records, etc.
There Are Always a Number of Interested Parties
Never give a potential buyer any indication of the number of acquirers in the mix. It’s better to keep them guessing. But if the question arises, let your M&A professionals respond.
Post Meeting Conversation
As a potential buyer exits the facility, comments are usually exchanged with regard to the next steps. After the meeting, the seller and broker will debrief. The broker will provide feedback to the seller. The seller will put forth any questions or concerns which may result in a bit of tweaking to the presentation. The broker may ask for additional documents in response to buyer questions asked for during the meeting. It’s always important to respond to prospective buyer inquiries in a timely manner.
Unlike first dates, these meetings do get easier and eventually develop a flow. And unlike first dates, you don’t have to worry about a goodnight kiss.