Building A Dream Team To Supercharge Your M&A Process: Part 1 of 5
This is the first article in a five-part series about how putting the right team in place helps supercharge the M&A process, providing both sellers and buyers maximum value.
Back in 1992, USA Basketball made a radical decision about how to construct its Olympic Basketball team. It went with a “Dream Team” of NBA stars, rather than the college players who made up the roster every four years.
The results – a full onslaught of basketball artistry. Magic, Bird, Michael and the rest of the Dream Team cruised to the Gold Medal. It was almost unfair to unleash that much talent on the rest of the basketball world.
Still, it provides a valuable lesson for any business leader:
The best talent, working together, wins.
In the M&A world, that means finding investment bankers, lawyers and tax accountants who are the leading experts in their specific industry. The right rolodex of buyers can open doors quickly. Specific industry knowledge can help identify synergies between the seller and a potential buyer in a way that brings both parties maximum value. Identifying the right team of experts for our client is a crucial first step in our M&A process and one of the most important strategic advantages Exitwise brings to the table.
Six Months to A Maximized Exit
In addition to matching our clients with their own personal Dream Team, we also believe in following a process we’ve seen work time and time again as both sellers and buyers of businesses. The typical M&A process normally takes about six months and unfolds in four phases – Strategy & Preparation, Marketing, Buyer Selection & Negotiation, and Due Diligence & Documentation.
At Exitwise, we favor a five-phase process that starts with hiring our client’s own personal Dream Team as a critical first step. With the right team in place, each of the subsequent four phases can be supercharged, thanks to their industry contacts, marketing expertise, unique product, service or software knowledge, and shrewd negotiating skills with buyers they know personally.
Over the next month, we will share in-depth information on how the Exitwise team and an M&A Dream Team help business owners successfully navigate the final four phases of the M&A process. In the meantime, here is a broad overview of each.
Strategy & Preparation
Once the Dream Team is in place, they begin helping the seller with the initial phase of information collection to build out a data room, an online repository where key documents will be securely housed and shared in the next phase of the process. This information will also be the main source for developing company marketing materials that will be used to help merchandise the selling company to potential buyers.
At this stage the Exitwise Dream Team also begins identifying potential buyers. With the right industry contacts, your Exitwise team can identify 10-15 highly likely candidates. A generalist investment banker will likely have to start their search for a potential buyer from scratch and download lists of 100 or more potential candidates.
In phase two, the team begins reaching out to potential buyers. Because the Exitwise Dream Team has such deep industry insights, they can tailor marketing messages and materials that will resonate with target buyers. Too often, generalist investment bankers will cut and paste boilerplate materials and send as a mass mailing to their list of 100 prospects. This is a recipe for compromising confidentiality and process failure.
Potential buyers who show interest at this phase engage in non-disclosures and Q&A to learn more about the seller and potential synergies between the two organizations. Furthermore, the seller and investment banker continue enhancing the data room.
Buyer Selection and Negotiation
At this stage, the Dream Team provides the first peek behind the curtain by opening a limited data room to give the potential buyer an overview of the company’s products and services, financials and management team. In addition, the seller's team finishes the full data room, which will eventually provide all the data needed to help close the sale with the final selected buyer.
It is also at this stage when the Dream Team begins selecting firm offers from the potential buyers. Because our contacts have deep industry connections and industry knowledge, they are often able to bring multiple prospects to the table. Lining up competing offers helps drive up the ultimate sale price and it puts the seller in the driver’s seat.
Due Diligence and Documentation
In the final phase, a buyer is selected, final terms for the sale are negotiated and formal due diligence is conducted by the buyer. At this point in the process the seller and the Dream Team will have walked the buyer through most of the seller’s details so there should be no surprises that can torpedo a deal. In addition, the final data room should be an open book, providing answers to every conceivable question.
With the Dream Team guiding clients through the M&A process, the final sale and terms will likely be a win for both seller and buyer. The seller walks away with a handsome reward for years of hard work while the buyer has obtained an entity that will significantly strengthen their operation.
No process should be so rigid that it can’t be adapted to the unique needs of an organization. But, with this basic framework in place, Exitwise and your own personal Dream Team can help put business owners in a position for maximum success.
In 1992, the Olympic Basketball Dream Team raised the bar for excellence and left no doubt about winning the Gold. In the coming weeks, we’ll share our view of how Exitwise can build your personal Dream Team to give you the best opportunity to win your own personal gold medal.