With buyers actively targeting businesses, impartial M&A advice is more important than ever
Liz Jackson writes: The first time you get that ‘tap on the shoulder’ it’s flattering. You know what I mean: when a potential buyer contacts you out of the blue to enquire whether you’d be interested in selling your business. It’s often preceded by some very complimentary commentary (“what a great company you have!”) and talk of strategic fit (“we’d be a great home for you…”). As a former business owner myself, I know the feeling. You get a call; it gets you thinking.
“We have never experienced a market like this for the sheer volume of direct approaches”
But when you’re being contacted regularly by one or more buyers (and their representatives), then that sense of flattery turns to pestering. I talk to business owners regularly, and what I’m hearing right now is that this is a weekly occurrence, a constant stream of one-way communication. We have never experienced a market like this one for the sheer volume of direct approaches, with sectors like software, healthcare and tech particularly prone to unwanted attention. Maybe you are currently getting more ‘buy’ calls than sales calls. In the words of one business owner I spoke to: “This is getting beyond a joke.”
Let’s look at things from a buyer perspective. In an active market for company sales, it’s a sensible move to approach a target business (and that language is appropriate – if you’re doing well, your business has a bullseye on its back). The goal is to identify an acquisition and lock out any competition. Many of the most active buyers and investors, including Private Equity, are serial acquirers. They are highly experienced in M&A processes, making multiple acquisitions each year, sometimes with multiple deals happening at the same time. They may have divisions dedicated to identifying potential acquisitions, or a retained buy-side M&A advisor whose role is to identify the right investment opportunities. That pestering? They’re just doing their job.
When is your advisor not really your advisor?
To level things up a little, many business owners turn to an advisor to help them navigate a potential sale process, and handle external interest. Even if the buyer contacting you is someone you know and trust, and it’s a deal you want to do, it makes sense to have someone on your team, representing your interests. But this is where things can get a little muddled.
Typically, the big-name corporate finance advisors have both buy-side and sell-side divisions – i.e. teams who work for buyers, and teams who work for sellers. However you spin it, and however ‘separate’ these teams are, there’s ultimately some conflict of interest there. If you forgive the analogy, it’s like having the same estate agent selling your house, as well as the house you want to buy. Their interests and yours aren’t necessarily aligned. Sure they want to get a good deal for you, but the bigger picture is just to get the deal done – you are a link in the chain.
One shocking story – shared by a potential client recently – showed just how divided loyalties can be in 2021. Having interviewed one company as a potential M&A advisor for a sale process (in what should be a private and confidential discussion, secured under NDA) the selling business received a call directly from a buyer. Opening line? “I hear from our friends at XYZ you’re for sale. We’re interested.” Suffice to say, that advisor didn’t get the gig, and the selling business was rightly livid.
The value of independence
If you are going to work with an M&A advisor – choose one you can trust, and whose advice you respect. I would say this, of course, but this is where I believe an advisor like BCMS adds value. We are a sell-side advisor, exclusively. We don’t do anything else but help clients sell. While we do have relationships with buyers, and have sold to some major acquirers on multiple occasions, we have no commitments or arrangements whatsoever. We pride ourselves on profiling buyers beyond the usual suspects, including internationally and in complementary sectors. We are totally impartial, and we work only for you, the seller.
It’s actively in our interest to get you the best possible deal, at the right time. We aim to run a competitive process on your behalf. Buyers don’t typically like it – why should they? – but our goal is to create a market for your business, and have multiple acquiring organisations actively competing for your company. This can take time. We often work with clients over an extended period to prepare your business for sale, and launch a process when the time is right. This means, we hope, that you can trust our advice – and we’ll be honest with you, even if that message is not initially what you want to hear. A good example of this occurred in a recent transaction, the sale of medical communications agency Spirit Medical to OPEN Health.
Our former client Asif Zaman can take the story from here: “I had been considering exit options since 2017 and have been working with BCMS for some time to make Spirit sale ready and maximise its appeal. In response to BCMS’ advice – and feedback from the market – we transformed business operations, established a high performing leadership team and fast-tracked infrastructural development. We diversified the client base and focused on operational and financial performance driven through our ‘people first’ ethos and nurturing talent. BCMS kept interested parties engaged and, when we pushed the button on a competitive sale process in early 2021, all of our extensive preparation and planning really paid off, ensuring optimal timing and conditions for progressing discussions with a broad range of potential buyers.
“This transaction has exceeded my expectations, and not just in terms of my own personal outcome, but more importantly in finding the right home and cultural fit for Spirit and its fantastic team of professionals. BCMS worked in partnership with me at all times, and managed the process and deal momentum expertly, always in my corner, offering straight-talking advice and valued support.”
That’s our partnership approach in a nutshell: working to get the right deal, at the right time, for you – and you alone.