Merger & Acquisition : Power Tips On Who, Why, What And How To Do The Initial Talk With Intended Seller
You have amassed sufficient cash in your company since it started, and you are ready to expand your business either via vertical or horizontal integration.
You have identified the possible targets to acquire, and are about to talk with the intended Sellers.
Now, Don’t start your “Talks” with the intended Seller before reading the Power Tips below…..
Why “Talk” :
1. To understand the Seller’s real Motive to Sell
2. To develop the Rapport & Trust needed for successful Due Diligence later
Who & What to “Talk” :
1. Talk to the “Owner” to know if he is retiring, or if he is in shortage of Cash, if he is being sued, if he is being chased by his vendors, if he or his company owns any Intellectual Property, etc
2. Talk to “COO” of selling company to know if there are any System Issue, People Issue, Market Issue, Procurement loopholes, etc. If the company is profitable, why intends to sell ? Any SOPs in place, does company do R&D, etc.
3. Talk to “CFO” to know Revenue Size, if GST registered, any pending Tax Issues with IRAS, any Cash Flow issues, any Bank Loans, Capex, any Subsidiaries, any Bad Debts, size of Inventory ( if any ), if Internal Controls in place, Authorization Matrix, etc
4. Talk to “HR Director” to know if the Management Team is strong, head count of company, number of Direct Vs Indirect Staff, any HR Policy in place, any Family members in the company, past Resignation rate, Staff Training Program and philosophy, Hiring Policy, etc
How to “Talk”
1. Casually
2. Over coffee
3. Do Not write notes in front of them
4. Do mental notes
5. Excuse yourself half way to go toilet to note down important points in your phone
6. You talk to Selling owner, send your CFO to talk to their CFO, your COO to talk to their COO, and your HR to talk to their HR, compare notes at end of visit later. The point is to gather the maximum information in the initial 2 hour visit with Selling company before they put on their guards before Due Diligence phase later
Gather your Team at the end of visit to share notes.
Once you have decided to move on to next phase ( Letter of Intent or LOI phase ), make sure you know what you want to acquire – ie
1. The target company or
2. It’s Customer Base or
3. It’s Management Team or
4. It’s Brand or Intellectual Property Rights or
5. It’s Assets or
6. It’s Assets and Liabilities or
7. Its Recipe
Note down on a piece of paper the Goal you want to achieve from this Acquisition and the maximum Time and Money Resources you want commit in this Deal.
Be very prepared to Walk away from the Deal anytime if either Goal, Time or Money Resources not met. Do not procrastinate.
Hope the above power tips help in structuring your phase 1 of Merger & Acquisition – ie “Talk” to Seller.
Good Luck !
If you need help, feel free to contact us at :
(O) +65 63851011
(M) +65 90880669
