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3 ways to negotiate an off market acquisition

  • We have a three year plan we’re in the middle of executing
  • We’ve just hired a new Managing Director
  • I might be interested in a couple of years when I can get a better valuation
  • We always have companies sniffing around
  • I’m not interested
  • No!

These are all typical replies you may come across when approaching business about acquisitions. While it can be off putting to hear a “no” when contacting owners, experienced acquirers know that these standard responses are just knee jerk reactions when unexpectedly asked about acquisitions.

Get your owner to a yes

It could be even more worrying for an acquirer to hear that they were willing to sell in direct response to being contacted out of the blue. A business owner will obviously have their headspace somewhere else and focused on delivering the execution on whatever strategy they currently have. This is probably why you’re interested in their business in the first place.

Don’t try and convince them to sell their business immediately that you contact them, instead see this as the first step of a much longer conversation. You should be looking to get a meeting face to face so you can both get to know each other and see if there’s a business match on both sides of the table. Then you can start the process of turning that no into a yes.

Here’s 3 ways to negotiate an off market acquisition

1. Do your research

You should spend some time getting to know the business, it’s position in the market, its competitors and its culture. You should also spend some time learning about the owner, finding out about their passions, their hobbies and their world view. Often times family members are involved in the business, find out if this is the case because this can have a bearing on how the owner may be thinking.

2. Pick up the phone

Often emails or letters go unanswered or straight into the trash. Making a call to the prospect indicates that you are serious about contacting the owner and that there’s a person at the end of the approach. Often businesses are blanket bombed with impersonal approaches from business brokers and this can cause enquiry fatigue. If you’ve done your research right you can use this opportunity to build some rapport before your first meeting.

3. Find out their motivations

Often off market sellers have motivating factors that they haven’t yet given much thought. If an owner is in their late forties or early fifties they probably don’t have a succession plan in place and the prospect of suddenly leaving the business may make them think about it. Maybe they’re exhausted but hadn’t realised they could sell. They could feel stagnated with the current business, having given it several years of their life and they’ve run out of ideas to grow it. There could be a change in their personal life and they would like to spend more time at home. Perhaps they are a serial entrepreneur and they would like to move on to another project or maybe they are interested in finally realising some money from their hard earned work.

Don’t give up

If you are getting the cold shoulder from your potential prospects, maybe it’s time to lean in and pursue those owners in a different way. Use these 3 techniques to recalibrate your approaches to acquisitions and see your results change for the better.