M&A: 10 Tips for Acquirers

In the eyes of the seller all acquirers are not equal, and we know from decades of sell-side experience which acquirer approaches are more likely to succeed. Here are 10 tips:

1. Have a strong reason why:

Have a clear strategic rationale for acquiring to share with targets or their advisers. Include a description of the ideal target business and be clear about what latitude is acceptable.

2. Share your timeframe:

It can reassure acquisition targets approached directly and motivate sell-side advisers to share client details in the right timeframe for you.

3. Invest in a search plan:

Set aside dedicated people and resources to undertake a deliberate search strategy in order to identify the best targets at the right time. This does need persistence.

4. Look on-market and off-market:

Let sell-side advisers know your requirements, but also seek off-market opportunities; the best target business may not be contemplating a sale, but with the right approach we know that can change quickly.

5. Inspire confidence in sell-side advisers:

Sell-side advisers want confidence that you are a serious acquirer before they introduce their clients. Give thought to how you might achieve that, the credentials which will help, especially if you’re a first-time acquirer.

6. Prove your capability to transact:

Sellers and their advisers are cautious about acquisitions contingent on raising funding only after an acquisition target has been identified. Almost certainly, you will not be granted exclusivity until ‘proof of funds’ is achieved.

7. Understand the seller:

It is commonplace for price alone not to be the main motive for a seller choosing their preferred acquirer. The plan for the business, cultural fit, deal structure and amount of consideration on day one, are often more influential than headline price.

8 Avoid off-market tactical errors:

We’ve lost count of how many sellers have initiated an auction process whilst already having a ‘buyer in tow’ because the acquirer makes a tactical error which causes a loss of trust.

9. Valuation turn-offs:

Try to avoid citing rigid formulaic valuation multiples.

10. Stay with it during due diligence:

This is the most stressful stage for sellers as due diligence advisers scrutinise their business. Try to stay fully engaged throughout to sustain the relationship and goodwill.

Fivefold offers an expert target research and engagement solution to acquirers who want to inject more momentum, greater precision, and more certainty into their acquisition plans.