The Six “D’s”
Business Owners are an interesting breed. For the most part, we have found them to be achievers with a unique sense of purpose. Building a successful company is not an easy task. Owners spend many long hours and sleepless nights devising ways in which to make their companies more successful. It’s no wonder that when they feel the time has come to sell their firms, they haven’t had the time available to understand the dynamics involved in the selling process. This sudden lack of control concerning the undertaking of a completely new process is unnerving to say the least.
In the 13 years that I have been in the mergers and acquisitions business, I have noticed a pattern of six (6) phases that an owner goes through on his / her way to a successful sale of their organization. I’ve named these phases the Six “D’s.”
Most entrepreneurs are dreamers in a sense. They visualize what it is that they want to achieve and then construct plans to fulfill their dream. For most business people, building and selling their own business is achievable only once in their lifetime.
For most business people, building and selling their own business is achievable only once in their lifetime.
Because of all of the uncertainties involved in their thinking at this early stage, this dream phase may continue for a prolonged period of time. After all, it’s “their baby” that they’re thinking of selling. However, inevitably, something occurs to trigger the second phase. Whether it is a conversation at the dinner table with the spouse or simply realizing that it’s the appropriate time, a decision must be made.
The second phase is an action phase. The owner puts his dream into action by making the decision to move forward. After discussions with family, associates and business partners, a level of comfort is reached and plans to move ahead are undertaken. Among other things, an intelligent owner will realize that this is a process that he definitely needs help with. Therefore, he chooses a firm like Aspen Mergers and Acquisitions that can assist him in many ways throughout the process. Not only can we provide psychological support throughout this process but, we can provide the necessary means to professionally present his firm to many prospective nationwide and international buyers.
It’s been my experience that the third phase leads to delays. The owner may have second thoughts and is also immersed in supplying the necessary materials to build a professional package with which to approach prospective buyers.
The professional M&A broker will also continually be discussing the owner’s real objectives and motivations in order to be certain that they can be satisfied.
Many owners don’t like having to supply details that are usually gathered by one of their subordinates. However, due to the private nature of this process, the actual gathering of the information normally falls to the owner himself. The professional M&A broker will also continually be discussing the owner’s real objectives and motivations in order to be certain that they can be satisfied. Time spent in this phase is usually profitable because it provides a necessary reconfirmation of the owner’s decision to move forward.
Once the final decision is made to move forward, the search process begins in earnest. Like all entrepreneurs, the owner moves from a stage of vacillation to one of exuberance and expects a deal to materialize in a matter of days. However, the process, when undertaken professionally, takes time to circulate introductory materials, receive necessary executed non-disclosure agreements, interview prospective buyers, schedule conference calls and visits with the owner, etc. Patience and fortitude are two necessary characteristics while this phase develops.
The relationship with the M&A broker is critical at this point in order to keep things moving smoothly and to avoid any buyer / seller confrontations.
In time, the owner will hopefully be presented with a number of Letters of Intent (LOI’s) that he / she will have an opportunity to review. We will help him understand the terms and the structure of the various deals and negotiate any remaining points prior to the owner actually executing the chosen LOI. Having the opportunity to receive multiple LOI’s provides the owner with flexibility and a sense that nothing has been left on the table. Once the LOI has been executed, the deal moves to the due diligence phase. This stage usually poses problems for an owner because it’s intrusive and investigative. These are things that an owner is not used to inside of the confines of his / her own company. The relationship with the M&A broker is critical at this point in order to keep things moving smoothly and to avoid any buyer / seller confrontations.
Just when you thought that the deal was nearing completion, a snag of some type arises. Keeping in mind that lawyers are now involved at this stage, sometimes negotiations hit a dead end. This could be due to the fact that there really is a deal breaker issue involved or it could purely be posturing on the part of one of the parties. The owner feels deflated after expending all of the time and effort to reach this point. It’s now our job to go to work and use our previous deal making experience.
Explaining that this is a fairly normal occurrence in the deal cycle and guiding the owner through these psychologically demanding moments is how real deal makers earn their stripes. I often have compared the deal making process to getting onto an elevator and pushing the button for the middle floor mezzanine. However, the elevator keeps stopping at only the basement and the penthouse which frustrates you to no end. This is the daily nature of an M&A deal. We’ll help you get to the mezzanine safely and sanely.
The day the deal closes will be a very satisfying day. You’ve worked hard to achieve this and you deserve the rewards. The process has, at various times, been exhilarating and debilitating. You’ve learned a great deal and have accomplished something that only a small percentage of all business people have ever attained; a successful sale of your company.
Congratulations from all of us at Aspen Mergers & Acquisitions. We’re not only deal makers, we’re dream weavers.
Robert A. Veri