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Preparing for a Successful First Meeting
After you've initiated or accepted conversations with a potential acquirer or merger partner, the next step is successfully nailing that first meeting.
At this point, you've identified your ideal or target acquirers or at least vetted those inbound inquiries to make sure they are a good fit. You've tested their interest, followed up intelligently, prepared a winning pitchbook, and have made sure you have a direct line of communication with real dealmakers who can make decisions.
Now it is time to arrange and prepare for a real meeting about this potential M&A deal. This crucial meeting can be make or break.
If things go well and they find synergy and love you, other future glitches and issues can be survived and forgiven. If you don't nail the first meeting, then it is unlikely you'll get a second. Even if you do, you will already be on the defensive and trying to force it to work from a less advantageous point.
Success here relies a lot on preparation and planning. This means being prepared with the right materials and data, being in the right mindset, and understanding the thinking of those on the other side of the table. You need to know the questions and answers. You need to know how to run a meeting that has great flow and gives you the upper hand in negotiations. And you need to know how to close the meeting.
Don't miss the opportunity. Don't rush it and burn it because you aren't really ready.
Finding Out the Strategic Road Map of the Buyer
Knowing yourself is important. You have to know yourself as a person, as an entrepreneur and leader, and you need to deeply understand your company, team, and your position in your market.
Knowing your strengths, weaknesses, threats, and opportunities is a factor that will come into play in the days ahead with the type of deal you are willing to make and with which buyer.
More important in this situation, you have to know your buyer. The better you know your buyer as a company and all of its players, the more likely you are to score the LOI, achieve a higher valuation, and see the deal actually get closed.
Great exits are not accidents. Some may attribute luck to their startup's success. This point in the process happens to be one where you make your own “luck.” This is where preparation meets opportunity, where the art of the deal and the ultimate outcome depend heavily on a variety of micro-subtleties and negotiation tactics.
Unless, of course, you just want to leave your entire future and the future of your company and team to the whim of the overgenerosity of your buyer.
Every micro detail can matter when it comes to these first meetings. Don't stress yourself out over engineering them, but don't lose out by overlooking the power you have to influence the outcome.
You Have to Understand the Buyer
Understanding the strategic road map of the buyer begins with first understanding the buyer. Because companies are still made up of people, this means understanding their thinking at a corporate level and as individuals.
As part of the previous step (learning about the decision-makers and players involved in an M&A transaction), you should have begun to identify the individuals involved at the specific company.
If you are working on a very tight shortlist of buyers, narrowing it down to a real meeting, you want to know these individuals by name. You want to know as much about them as individuals as possible. Every edge you can get for these negotiations can help.
This will help to avoid detractors who may shortsightedly derail the deal or make it much more difficult and make the terms less attractive.
You want to know the executives, board members, major shareholders, key team members and cofounders, relevant department heads, transaction coordinators, advisors, bankers, attorneys, and corporate development leads.
A little research into these individuals can reveal a lot. Just reading their bios and résumés, and taking a glance at their LinkedIn, Twitter, and Instagram profiles, can tell you more than you expect. These steps can unveil their world view, passions and frustrations, backstory and experiences, who is in their network that you might know, and even their favorite colors, meals, and what they are reading.
You may also discover information about their personal strategies. That's a lot you can work with when it comes to curating a meeting and tailoring a presentation. You can connect with them better and lay out the opportunity in a way that appeals to them personally as much as it checks the boxes at the corporate level.
The Importance of the Buyer's Strategic Road Map
Understanding the buyer and the company's strategic road map is pivotal to connecting on the right points in the right way. The strategic road map can apply to this specific deal and your company, the transition and post-transition, and the company as a whole in the short, medium, and long term.
Your understanding of this is critical to checking their boxes as well as maximizing perceived value. It will also help you gain better expectations of how the acquisition or merger process will unveil itself and how fast you might expect to close.
Specifically, it will also help you do the following:
- Manage the perception of exclusivity in what they are looking for and what you can offer
- Decide how to manage the phasing of information
- Maintain the right pace of momentum
- Deliver on the buyer's tolerance and need for risk-reward balance
- Be sure you are competitively positioned
- Establish synergies
- Present optionality
- Highlight how you are the best choice for a successful integration
How Do You Learn More about the Buyer's Strategic Road Map?
Asking questions is a good start. Start with your initial frontline contact. Why is the company interested in buying you? What is the pitch the company plans to take to the team to sell the deal? How does this specifically fit into the company's current strategic plans, goals, and needs?
Dig into the data. What has this company been up to? What track is it on? Or what challenges is it facing that it needs to buy your company to overcome? Who is influencing the company with advice, and what are its known strategies?
Ask others, too. What do they know about this company's strategy? What clues might the company be seeing that you are overlooking or misinterpreting? What does the company know about its reputation when it comes to discussing and doing M&A deals?
To whom can you talk who has been on your side of the table with this company in the past? What were that person's strategies throughout the steps in the process? If the deal closed, what happened to the startup afterward? Did the company follow through on what it said or did things take a different direction? If the deal didn't close, why? What fell apart?
Look beyond what the buying side is saying and look into what it is doing. How is the buyer valuing your company? Who is involved in this process and conversations and other communications (which can give you clues to the company's intent)?
If there is any talk about the future for your team, and whether the company plans to pay with cash or stock or financing, what does that tell you? What reactions have you had to any suggestions for integrating companies?
The bottom line is that understanding the buyer's strategy will illustrate how to show up in the best way and make this a no-brainer, must-do deal for the company.
Agreeing On the Meeting Location
Where should you meet buyers when it comes to the first real conversation on buying your business?
Your meeting location can be influential to the outcome of this meeting and getting to further meetings. What factors might you want to take into account before deciding on or agreeing to their request? How will your choices potentially affect your advantages and disadvantages and the outcomes?
Who Is Going to Be Part of the Meeting?
Who will be in this meeting? This may be a factor you have to take into consideration.
Which people will be there from your side of the table? Are they local to you? Are they even working in the same time zone? What will it cost you to have them there or at different locations?
If you are paying your attorney $500 an hour and your executives $200 an hour, and you are thinking about flying them out to Silicon Valley, NYC, or London for a long weekend for this meeting (the first of many), then that is going to add up pretty fast.
Make sure you aren't going to bankrupt yourself just talking about this deal or put yourself under so much financial strain that you end up having to sell the company for half as much.
If everyone participating in your deal is in the same city, then it can make a lot more financial and time sense to host the meeting on your home turf.
Of course, the other side may make the same arguments, too. It may come down to who needs to make the deal the most.
Home Games versus Intelligence Gathering
If money and time are no hurdle and are negligible to you, then the choice of where to meet may come down to where you see the best strategic advantage.
In sports, the home team is considered to have a significant home field advantage. So much so that specific rules have been created for many sports to make sure games are rotated, and important matches are held in neutral stadiums. In some cases, scoring rules may even be different.
The data seem to back this up. In the 2018–2019 premier league soccer season, 100 percent of Liverpool FC's losses were away matches. In the 2018–2019 NBA basketball season, the home team won the game 71 percent of the time. Away teams won only 29 percent of the time.
There are a variety of reasons the home field can provide an advantage. Many of them are psychological. Scientists have even discovered chemical and hormonal changes in athletes competing in a sporting event at home—more than regular training play.
Energy and routine can be a big part of it. Meeting on your home ground means you can sleep in your own bed, go through your own morning success ritual, and make sure you get a good cup of coffee. You'll be rested, in your zone, and on top of your game.
That isn't always the case if you are rushing to a meeting halfway around the world, you spent the night trying to sleep on a super-cramped Air France flight, and then had to hitchhike the last 25 miles on a camel after your rental car broke down in the desert.
At home, you also get to control everything about your environment. This is true for everything from the colors of the decor to the food and drinks, the temperature, lighting, presentation equipment, and availability of backups and tech support. You even have a say in the attitude of the people in the background and with whom your visitors interact. You can curate everything.
With all of that said, there can also be exclusive advantages to going to your acquirer's turf.
This offers some reconnaissance and intelligence gathering. It's a unique opportunity you may want to leverage as early in the deal as possible.
You'll be able to meet more of their team and the players in the process. You might get to peek inside the operation and see if it is really where you can see yourself and your team. You get to meet people in their natural habitat. This can show you far more than anything you can find online.
It is an opportunity to pick up all kinds of useful clues and data that can be used from the outset and throughout the negotiation process. You get to see how people are treated and how money is spent. The pictures on people's desks will tell you what is most important to them, and you might even end up at their homes after dinner. You can get great insight into their world view, influences, and perspectives.
In-Person versus Virtual Meetings
Although virtual meetings may give you less to work with, they can be far more efficient than flying around the world. They may lack the in-person connection, but you may have no choice. When possible, and the numbers make sense, meeting in person can offer real advantages.
However, if you aren't going to be involved personally later, or all future communication is going to be virtual anyway, then why not start virtually?
Virtual meetings don't mean you can slack on your preparation. Thorough preparation may be even more important in these scenarios. Be prepared mentally and be mentally present.
Have a good internet or phone connection and at least one or two backup connections and devices, as well as a second and third option, for where you will take the meeting. (The crazy technical difficulties only happen when you are trying to have a really important conversation.)
Whichever app you choose to use, having the ability to mute, pause, and share your screen is handy. Your choices range from Zoom to Google Meet, WhatsApp, Skype, and FaceTime.
Setting Up the Agenda for the Meeting
The meeting should have an agenda, and it should be tight.
Everyone at this meeting is busy, and their time is valuable. Keeping a tight time frame keeps the discussion focused and moving forward. It also avoids boredom.
In fact, you'll want to share as much as you feel comfortable with in advance of the meeting, as well as the set agenda, so that any real meeting time is spent being productive and moving the needle. If you get along well, you can always go out for drinks, dinner, or spend a few hours just getting to know each other and musing about future possibilities, if you really want to.
Keep your agenda short and simple:
- Introductions
- Buyer presentation
- Seller presentation
- Q&A session
- Recaps
- Laying down the next steps
Follow Up with Emails to Keep Them Warm
Hopefully you've walked out of this meeting with a commitment on the next step, and a deadline attached to it. It is probably a sign of weak salespersonship on your side, or a lack of interest and match on their side, if you don't.
Either way, it can pay to keep them warm, staying at the top of their mind, and keep things moving with follow-up emails. Don't be desperate, but be consistent.
Following are some great reasons to follow up:
- Providing access to additional data or requested information
- Updates on your company progress
- Thank-you emails for the meeting and time together
- Asking pertinent questions after consulting the rest of your advisors
- Announcing new developments or milestones your company is achieving
- Advising them of other interest in buying your company
Understanding How to Address Concerns
All experienced buyers should have questions, reservations, and concerns—at least if they've been in business long enough and have done a couple of these deals. If they don't, they may not be the type of acquirer you really want to put your company in the hands of.
Be sure to follow up as promised, with additional data and information.
If you feel they are taking a wait-and-see approach, don't expect them to be tracking your every move. Make some noise about your traction and send them a copy of the link to the news.
In other cases, they may not voice their concerns. One entrepreneur (who shall remain anonymous) didn't get an offer from Apple after their meeting. Later, Steve Jobs said they didn't think the seller would want to move out to California. The seller hadn't even asked. It's your job to anticipate concerns and objections and head them off proactively in your first meeting.
Questions Potential Acquirers May Ask You
When you show up to these meetings, you want to be as lined up as possible. The following sections explore the questions that you should be ready to answer.
Market
You have to be able to explain exactly how you fit in the existing and emerging market.
- How big is the market opportunity?
- What percentage of the market share do you hope to gain?
- Who is your best customer?
- How long will this take?
- What is your PR strategy?
- Who do you most aspire to be like?
- Who do you least want to be like?
- Why is this the right time for this product or service?
- What is your marketing strategy?
Traction
Acquirers will certainly want to know all about your current and expected success.
- How much feedback have you received so far?
- What changes have you made based on that feedback?
- How many actual users do you have?
- How long do users stay on average?
- How many actual sales have you made?
- What is the annual growth rate?
- What is your total rate of growth?
- Has growth been linear and consistent?
- What has held back your growth?
- Can you provide a demonstration of the product or service now?
Team
Naturally, acquirers will want to know all about your team.
- Where are your headquarters?
- Who are the founders?
- Who are the key team members?
- Do you have any existing board members?
- What key roles may need to be hired for soon?
- What experience do you have in this industry?
- What motivates you?
- Are there any other people who may claim they are owed or are responsible for your ideas?
Competition
Acquirers have a vested interest in understanding who your competitors are and what similarities and differences you share with them.
- Who are your competitors?
- What are your strengths and advantages over your competitors?
- What are your weaknesses or disadvantages?
- What barriers to entry or scale are there for you?
- Where is the competition letting down customers?
- Why haven't your competitors done this yet?
- How do your features differ?
- How do you compare on price?
- How do you compare on service?
- How do you compare on customer satisfaction?
Financials
You really should either know your financial information or have it quickly and easily available.
- How are you marketing your product or services?
- How much is your marketing budget?
- What are your per-customer acquisition costs?
- How much is your customer lifetime value?
- How much equity and debt have been raised in the past?
- Who participated in earlier rounds of fundraising?
- What is your burn rate?
- How long will it take to become profitable?
- What are the key metrics your team is focused on?
- What stock options have been given already?
- What is the distribution of equity?
Intellectual Property
One core area that acquirers are interested in is your intellectual property and all related legal and regulatory matters.
- What is unique about the company?
- What big problem does it solve?
- What legal risks do you see?
- Are you aware of any product liability risks?
- What regulatory risks could affect this business?
- What intellectual property do you own?
- Who developed any intellectual property owned?
- Have any employees or partners left who may challenge these rights?
- Are there any additional patents pending or planned?
- How are any current intellectual assets owned?
Business Model
Questions will come up about sales, marketing, customers, and all aspects of your business model.
- Which specific marketing channels are you using?
- Why are you using these marketing channels?
- What is your plan B if these sales channels are interrupted?
- What profit margins are you operating on?
- How will scaling impact profit margins?
- What pivots have you already made?
- Can you tell me a story about how a customer decided to choose you and their experience with your product?
- Who in this organization is most replaceable?
- What unique features are you working on?
- What other streams of revenue can be added to this?
Corporate Structure
Similar to knowing your team, understanding your corporate culture helps acquirers truly understand what makes your organization tick.
- How is the company currently organized?
- Who holds which titles?
- How are shares split?
- Is there an existing board or advisors?
- Where is the company registered?
- Who handles accounting?
- What unique skills and talents does each owner contribute?
- Name someone you chose not to include as a founder—and why?
- Who filed the company?
- Who is the registered agent on record?
Existing M&A Process
You also have to be able to explain everything about the mergers and acquisitions process.
- What is your exit goal?
- What is your expected time frame for this?
- What is the valuation of the company?
- How are you determining the current valuation?
- How do you see your integration with our company?