15 Jun Four Tips for Cultivating Successful Deals
In our previous article, “The Core Foundations of M&A and Interacting with Business Owners,” we dove in and explored some key concepts discussed during John Howe’s interview with industry veteran Laura Maver Ward. In this article, we will further explore some key tricks of the trade that Ward was kind enough to share. Over her 35 years in the M&A arena, Ward has emerged as a true industry expert.
1. Carefully Evaluate Each Situation
Ward places emphasize on working with people you can trust, but it is also important to evaluate situations on a case-by-case basis. For example, Ward notes one situation where she took a referral who seemed fine on paper. However, what Ward didn’t realize at the time was the business owner was a classic example of a control freak. This seller felt that he had to be involved in every small step of the process. Much worse, he questioned every small step of the process.
Adding to the misery of the situation, the business owner received multiple offers and yet refused to say yes. In part, this was due to the fact that the business owner was unable to understand the offers. Later, Ward learned that the business owner had a terrible reputation in the industry. Had she known this fact, she would have declined working with the client.
The bottom line is that it is essential to know who you are working with before moving forward. If you see “red flags,” move on. As Ward stated, “If you see someone who’s going to be difficult in the beginning, run! Don’t take on the project because it is not worth it.”
2. Make Sure Sellers Understand Their Valuations
When evaluating a business to work with, Ward believes that it is critical to find business owners that have a good understanding of their valuation, as this is a key ingredient for success. A business owner that understands his or her valuation is a business owner that will be realistic. This will usually translate into this individual being easier to work with.
Also, working with a business owner who understands their valuation can lead to smoother negotiation with buyers. It will decrease the chances of wasting a buyer’s time.
3. Send Professional Communication
In terms of communicating with buyers, it is important that the letters you send out, whether it is via traditional snail mail or email, are very polished and professional. Again, there is only one opportunity to make a first impression. Once communication begins with the buyer, business brokers should have a deep discussion about what the buyer is looking for. They need to have a firm handle on the acquisition criteria.
4. Deal Appropriately with Retainers
Ward points out that retainers can be a problematic area, but there are ways to deal with the complications that may arise. Three tips for dealing with retainer issues are as follow:
- Keep your retainer reasonable
- Clearly define your engagement agreement
- Give an out clause.
By following these three tips, your experiences with retainers will likely be positive.
5. Build Your Reputation
Ward spent a good deal of time in the webinar discussing the importance of reputation, ethics, trust, and integrity. She stated, “I’ve tried to live with high integrity, outstanding ethics, and tried to surround myself with like-minded people. Your reputation is all you have. If you don’t have high integrity and high ethics, then I think you’ll find it very difficult to be successful in this business.”
