Mergers & Acquisitions from a Buyer’s Perspective: What Every Seller Should Know

On June 13, Manning Fulton’s Mergers & Acquisitions practice group hosted a panel discussion about what buyers typically look for in acquiring a business. The panelists represented a variety of buyer types, including strategic, private equity and family office buyers.

The following panelists participated in the discussion:

• Tom Lyon, Partner, Manning Fulton, Moderator
• Robert Ange, Vice President & General Counsel, National Coatings & Supplies
• Michael Ives, CFO, Prometheus Group
• Phillip Ross, Vice President, Corporate Banking, Private Banking, Brown Brothers Harriman
• Doug Vaughan, Managing Partner, SharpVue Capital

The panelists discussed the different types of buyers as well as how their particular organizations approach acquisitions. In general, certain types of buyers will rely on existing management more than others, will use more debt than others and will be more likely to sell the company sooner. The panelists also discussed alternative methods for business owners to pull money out of their company in lieu of selling, including through recapitalizations.

According to the panelists, there continues to be a significant amount of ‘dry powder’ that is ready to be deployed in acquisitions. While multiples continue to be near historical highs, several of the panelists noted a clear separation in multiples for the most attractive sellers compared to other sellers.

The panelists had several tips for potential sellers, including the following.

1. It’s critical to have good advisors and a good team in place—particularly ones with strong experience in the M&A arena. The worst situations are when sellers don’t consider hiring an M&A attorney and an investment banker. A seller can waste time and money if the seller doesn’t have the right people on the team.
2. A seller shouldn’t wait to sell when he or she is ready to retire—particularly if there is no succession plan. A seller should attempt to maximize options. Sell off growth, not contractions. A seller should time the sale right, and provide for enough time to maximize the price.
3. A seller should build out a management team that can keep the business going post-acquisition. Buyers will want to see a management team that can succeed after the retirement of the founders.
4. Start putting together the story to show and prove the value of the company. Use data to support it. You need to show evidence. It all comes down to the numbers for most buyers. Clean financial statements showing good trends will be key.
5. Solidify key customer and vendor relationships. Expect a buyer to perform due diligence on key relationships.
6. A seller should be prepared to answer one of the key questions—what is motivating the seller to sell the business? The panelists discussed the importance of a buyer being able to understand the seller’s story and motivation to sell.

This program was part of Manning Fulton’s Executive Speakers’ Series. If Manning Fulton’s extensive M&A experience can be of assistance to you or your business, or if you’d like to be invited to future Executive Speakers’ Series programs, please contact Alan Dickinson, Director of Client Relations, at (919) 787-8880 or dickinson@manningfulton.com.

For additional information about Manning Fulton and its full suite of legal services, please visit www.manningfulton.com.