Sell the Seller
Sell the Seller
Years ago, I coined the phrase, “Buying is Selling.” It’s important to remember that an essential element of making an acquisition is to sell the seller when attempting to complete the purchase of a company. This is particularly true when dealing with a founder that is a majority shareholder.
A major mistake that buyer’s make when acquiring a company is that they do not sell the seller. More often than not, when a buyer approaches a target for the first time, they are turned down for one reason or another. The most common reason revolves around the buyer’s long-term motives for the company. If a seller does not have confidence that the buyer will uphold certain company philosophies, then the deal can easily fall through. Studies have shown that sellers are willing to accept a marginal reduction in price in exchange for certain reassurances. If the buyer is keen to acquire the company, it may be an essential step in the process to sell the seller. Therefore, as a buyer, the best way to increase the likelihood of a successful transaction is to be persistent and always sell the seller.
Sell the seller can manifest itself in many forms. At a superficial level, buyers should always take the time to develop a positive rapport with the target. This will allow the buyer to better understand the seller’s goals for a potential transaction. With this knowledge, the buyer will then be able to effectively tailor their pitch to fully resonate with the seller. Moreover, the buyer should convey, throughout the deal process, that they value the company’s stakeholders, i.e., customers, employees, suppliers, etc. Sellers want to know that their employees, customer relationships, brand image, etc. will not be sacrificed for synergy once the deal is completed. Buyers can help mitigate this concern by introducing the target to satisfied sellers from past deals. The successful application of “sell the seller” may be the defining factor in convincing the owner or seller to accept your bid.
Regardless of the technique, sell the seller requires creativity on behalf of the buyer. No one seller is the same. Every transaction needs to be approached in a new and unique way that specifically targets the seller’s motives. This often involves providing the seller certain assurances that the integrity of their company will not be exploited after closing. If accomplished correctly, this technique of selling the seller can act as a powerful differentiator in the competitive process of buying a company. An M&A firm with years of experience on both the buy and sell side will be able to guide you through this process adroitly and successfully.
