Tips for New Strategic Buyers
Growth through acquisition is a great strategy for supplementing organic growth, but it can be daunting for first-time buyers. From establishing goals to compiling a list of targets and completing due diligence, the process is certainly not something to be taken lightly.
Fortunately, there are proven methods for achieving value and making an acquisition worthwhile.
Hire a buy-side advisor
Hiring an experienced M&A advisor is the best way to maximize value and ensure a smooth process. By working with an advisor that can build a process and pipeline, you’ll be presented with a proprietary list of target companies, some of which are not being publicly listed for sale.
Before you are introduced to a target company, your advisor will have talked to and qualified the target. Having an intermediary makes an acquirer look more professional and positions you for sensitive discussions.
Buy-side advisors guide clients through all stages of the process, from having an initial conversation to actually closing a deal. All the while, they are carefully managing points of communication and data requests. It takes dozens of contacts between the advisor and a single prospective seller to get a deal done—a time commitment that makes advisors critical to a successful process.
Moreover, experienced advisors have a deep knowledge of market conditions, including how to navigate today’s unusual environment.
Have a strategy—for before and after a deal
Together with your advisor you should be developing a buy side strategy. What are you hoping to accomplish? Perhaps the aim is to expand to new geographies, add products and services or bolster your workforce. Be sure to define those goals.
Only after a strategy is developed does it make sense to establish criteria for a target in terms of size, location, product/service offering and culture. Experienced advisors will help determine what are “nice-to-haves” and “must-haves.”
Here’s a look at how the process should unfold:
1. Strategy Formation – Kick Off Call (Day One): Discuss acquisition strategy, expectations, communication and goals.
2. Marketing Documents (Week 1): Advisor will develop marketing materials to distribute to targets.
3. Identify Targets (Week 1-2): Advisor will complete extensive research and explore potential targets that fit criteria.
4. Building the Pipeline (Week 3): Outreach via mail, phone and email begins once a buyer approves targets and marketing documents.
5. Maintain Pipeline: Advisor will perform rigorous follow-up efforts while continuously providing buyer with new lists.
6. Discussions with Targets: Advisor conducts an introduction call with all interested targets to gather information for further buyer approval. Upon approval, advisor will coordinate an introduction call with client and facilitate data requests.
7. Offer Preparation: Advisor will assist with organizing target documents, valuation, LOI and negotiations with the target.
8. Due Diligence & Closing: Advisor will quarterback the due diligence process to ensure all parties remain on task, create clear expectations and maintain a strict timeline to keep the diligence process moving towards an efficient closing.
Maintain focus on running the day-to-day operations
Buy-side M&A advisors help acquiring companies to find potential acquisition targets, evaluate those opportunities and complete deals—all while the buyer goes about day-to-day business without a hiccup, instead of directing precious time and resources to sourcing proprietary deals.
Remember, being programmatic with M&A is the most effective strategy, making it even more important to maintain expert assistance. When M&A is treated like an ongoing commitment rather than a one-off project, outcomes are maximized while leaders can focus on their bread-and-butter operations.
Now more than ever, an advisor is critical to establishing and executing acquisition plans. At Copper Run, we preach developing a process and pipeline of potential targets whether you are a strategic, private equity or family office acquirer. Copper Run offers comprehensive buy-side advisory services, helping to efficiently find and execute proprietary add-on acquisitions and allowing you to focus on operational responsibilities.
We perform all proprietary list gathering, initial target diligence, outreach efforts and introductory calls. We streamline and optimize the diligence process to get to a Letter of Intent, assist with LOI negotiations between targets, bankers and attorneys, as well as coordinate meetings. To best demonstrate this, Copper Run provides our clients bi-weekly engagement trackers and their own virtual data room to rack outreach, target status, notes and next steps to ensure all opportunities are accounted for.
Our professionals have successfully advised on and executed comprehensive acquisition searches for companies that maximize value for acquiring shareholders. Please contact us if you or your clients would like to learn more.
Michael Shaw is a Partner and Managing Director at Copper Run. He specializes in both buy side and sell side assignments.