We recently noticed the fact that a significant number of deals we’ve closed this year involved clients that had been to market with other M&A firms and business brokers. This led us to look internally at our processes and to contact some of these former clients to identify a few of the key factors that drove successful outcomes for our clients that had been previously snubbed by the market.
Our approach to outreach. Benchmark International has always prided itself on having the most robust and broad outreach in the market. Each client’s team includes four outreach specialists dedicated solely to distributing teasers far and wide, securing executed non-disclosure agreements, and conveying those expressions of initial interest to their client. We’ve long known that this sets us aside from the competition and is a key to our success but what we didn’t know:
- Other M&A firms and business brokers build a single buyer list near the initiation of the process.
- They don’t have anyone dedicated to continuously update that list with new ideas and market feedback.
- They don’t have an internal feedback loop that allows other team members assisting the client to easily offer new insights to the outreach professionals.
- They build their buyer list too early in the process, before they actually understand each of the value propositions the client can offer potential buyers and they thus miss out on large categories of potential acquirers willing to pay top dollar.
- Similarly, some do not get to know the client’s business well enough to identify all of those value drivers, regardless of when they “build their list”.
- They have a “usual suspects” approach to buyers. We find this particularly problematic for our clients when they were with “industry specialist” brokers. Given our process, we find that the best buyers for our clients are actually very rarely the “usual suspects” but instead are buyers for whom we have identified a particular need which our client can satisfy for them. As they say, “You can’t find what you’re not looking for.”
- Many lack the software and systems to conduct and execute a thorough outreach process.
- Outreach can be mundane, there is no getting around it. For each hour spent on outreach, the broker will have more than a few doors slammed in their face. Accountability is thus key to achieving top results. Other M&A firms and business brokers typically lack the necessary hierarchical team approach and the software necessary to monitor and motivate outreach professionals.
- Building a list using a variety of ideas arising from as many investment theses as possible for the client requires access to vast data bases of buyers. Benchmark International has built up a proprietary data base of buyers built over 30 years of experience in the market and over 1,000 closed deals. In addition, we pay significant license fees for the world’s leading M&A acquirer data bases. We ensure that our outreach professionals have access to these best-in-class resources and the training necessary to exploit them to their maximum benefit.
- For any individual engaged in a broad outreach effort, keeping track of who’s been reached, who’s been left messages, who’s responded, etc… is a daunting task. It can’t be efficiently performed with pen and paper or even spreadsheets. Only an interface specifically designed for the task can ensure that all buyers on the list are contacted, follow ups occur at optimal times, responses are not only captured but also analyzed for insights into the outreach effort, and nothing falls through the cracks.
- Lack of a global approach limits results.
- There are actually very few clients that need a “local buyer”. Yet we learned that many of our smaller clients had been marketed solely via local contacts, country clubs and Rotary meetings, and local online portals. But taking the US as an example, Benchmark International has sold clients from the smaller end of its portfolio from Miami to a buyer from Sri Lanka, and an “as-seen-on-TV” business to a buyer from France.
- The key here is not just having access to a global buyer base but more importantly running the process with the philosophy that the buyer can and will come from any corner of the globe.
Our handling of acquirers. Though they could not fully explain why, our clients stated that they noted a distinct difference in buyers’ interactions with both them and the broker when Benchmark International was the introducing party as opposed to their former broker. When describing the differences on their initial calls with buyers and, for those who had gotten that far with the prior broker, their negotiations with buyers; our clients referred to being treated by the buyers more as peers, having a more cordial relationship and being more comfortable, getting more quickly to the key issues, and seeing quicker term around times from buyers. To augment our clients’ insights as to the sources of these differences, we also then reached out to a few recent acquirers of our clients and, putting all the inputs together, learned the following.
- The markets have gotten more complicated.
- We continue to see more complex deal terms and structures filtering down to smaller and smaller deals. Since the global financial crisis of 2008, many M&A professionals that formerly ran larger, perhaps publicly-traded, deals in the billions have moved “down-market” and are now doing deals in the millions. They have brought with them all their complex financial training and tricks. As a result, buyers have gotten sharper, and deals have gotten harder and longer.
- Our clients tell us that their former M&A firm or business brokers weren’t up to speed on these new issues, couldn’t stand toe-to-toe with the sophisticated buyers, and even that they “didn’t speak the same language” as the buyers. Most significantly, they couldn’t bridge the gap between the seller’s understanding of the process and the buyer’s.
- Getting deals done at today’s high multiples requires knowing how to use these new tools to find win-win solutions for buyer and seller. Our clients tell us that they saw their former M&A firm or business brokers utilizing the old-fashioned bazaar mentality of zero-sum-game negotiating and when they saw how Benchmark International handled the negotiation process, they could tell that our process was built on a different foundation.
- The broker’s reputation with buyers matters.
- Our clients described their former M&A firm or business brokers as aggressive, antagonistic, and even “churlish” when negotiating with buyers. That’s not our style. Our style is to build respect and goodwill with buyers. The respect is there to be preserved and used to allow buyers to make a leap of faith with us when necessary. The goodwill is to be burnt strategical and only if and when required to get the client the right result.
- Because of the number of deal teams we field, the quality of the clients we bring, and the experience buyers have had with us in the past, they take our calls and they read our confidential information memorandums. They know that we have great “deal flow” to show them, that we only bring serious clients, and that our clients are prepared for the process. Buyers have told us time and time again how important these three factors are to their decision to return our call first, open our outreach emails, and sign our non-disclosure agreements.
- M&A firms and business brokers who burn their bridges on deal after (broken) deal aren’t doing any of their clients a favor. If the buyer can’t trust the broker – or even worse, won’t take their call – deals don’t get done.
- Being a household name is important. But if your name is bad, its important in a bad way. Smaller M&A firms and business brokers aren’t a household name and many larger ones lack the quality control across their offices to ensure that the name is a good one. So say a few private equity funds Benchmark International contacted on this point.
- Thinking like a buyer is important.
- While Benchmark International is a sell-side only firm, many of our professionals have worked for trade buyers, private equity funds, venture capital firms, and the like. They are not only staffed on many of our clients’ sales but have also provided input into our processes and training to ensure cross-pollination of their insights. This allows us great visibility into their needs, their negotiating techniques, and their next moves. It also helps us relate to them, build trust, and (as mentioned above) truly “speak their language”.
- While some brokerages provide both sell-side and buy-side services, serving in this capacity is not the same as being a buyer or having been a buyer. Unlike sellers, buyers are experienced in setting up and executing M&A transactions because, among other reasons, they do it repetitively. As a result, buy-side M&A firms and business brokers don’t typically get in there and get their hands dirty molding the clay of an introduction into the statue of a closed deal. They are more in the nature of “finders” or introducers, leaving the heavy lifting to their buy-side clients (i.e., the people many of our professionals used to be).
- Empathy and emotional intelligence are important for managing the relationship that is formed during the sale of a business. Our clients have been telling us for years that they appreciated our attention to the personal side of the deal often manifested in family issues, a strong attachment to the business, the occasionally irrationality that pops up in this high stress situation, etc…. But undertaking this process of determining what distinguished us from other M&A firms and business brokers led us to realize that our emphasis on these aspects of each transaction has a spill over to the nature of our interactions with buyers. While they like to give the appearance of detached, entirely-rational Vulcans; they are in fact people too and bring their own subtext to every deal. Based on our conversations with acquirers, building a process that can absorb such unavoidable distractions – from both sides – is perhaps Benchmark International’s single largest distinguishing characteristic. They tell us its an intangible that would be almost impossible for other M&A firms and business brokers to match unless their firms were built from the same DNA as ours.
Lastly comes a point we here at Benchmark International already knew. We hire people who seek challenges to overcome, the bigger the better. Knowing that a client has come to us disappointed by a prior process, whether they focus that disappointment on the market or the broker, fires us up. Anyone can sell a business that is easy to sell for a normal multiple to a decent buyer. But true satisfaction comes to us only from selling the difficult business, achieving the aspirational valuation, or finding the perfect buyer. So the last answer to the question set out in the title above is - we rise to the challenge.
WE ARE READY WHEN YOU ARE
Call Benchmark International today if you are interested in an exit or growth strategy or if you are interested in acquiring.
Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkCorporate.com
Europe: Carl Settle at +44 (0)161 359 4400 / Settle@Benchmarkintl.com
Africa: Anthony McCardle at +2721 300 2055 / McCardle@Benchmarkintl.com
ABOUT BENCHMARK INTERNATIONAL:
Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximizing solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $6B across various industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 12 offices across the world, have assisted hundreds of owners with achieving their personal objectives and ensuring the continued growth of their businesses.