07 May How to make contact with the owner of a business about an acquisition
Acquiring a company can be a long process, not only do you have to kiss a lot of frogs, but contacting an owner for the first time about acquisition and knowing what to say can be fraught with problems. Many “not for sale” businesses are likely to give a competitor making overtures the cold shoulder, the frogs don’t even want to be kissed.
When beginning a conversation with an owner, you need to have spent some time getting to know the business, where it’s positioned in the market, who its competitors are and most importantly what the culture of the business is.
You should also spend some time learning about the owner, reading any industry blog posts about them and looking at their own blog or social media posts. Finding out about their passions, their hobbies, their family situation and their world view can be just as important as crafting a fair offer. Obviously you cannot know everything about a seller, but making the effort and showing that you have invested in their company with your time already can make the owner feel that you are serious about their company and not just blanket bombing businesses looking for a sale.
Making contact with an owner in the right manner can be a critical step in the acquisition process. You want the owner to like you, as they are unlikely to sell their business to someone they don’t like, even if you’re making a good offer financially.
There’s an asymmetry between the buyer and the seller. The buyer can acquire as many companies as you want, but for the seller, this may be their life’s work and they only have this one time to sell and get the best value from the sale for themselves.
Here are three things to remember when making first contact with an acquisition target:
- Don’t go into too much detail on the first call, your offer may have come completely out of the blue and you should give the owner some time to think about the idea of selling their business.
- Many owners will have three to five year plans that they were committed to executing, you are offering them something completely different to where their thoughts had been heading, understand that first contact is just the first step of maybe months of conversations.
- Don’t set the date for the first meeting too far into the future, if the business is in a particularly hot space there may be other suitors contacting the owner. Also, many owners can talk themselves out of selling if left too long or friends or spouses may convince them to look around for other offers.
There are no hard and fast rules in acquisitions, but always remember the human factor and that you are often dealing with people’s emotions as much as anything else. Using an intermediary to make first contact can often remove some of the emotional responses owners may have when being contacted by a competitor even if they are open to selling up.