How to Prepare for Buyer Visits When Selling Your Company
When selling your business, it’s typical for potential buyers to visit your company. In a formal auction process organized by an investment banker, these visits (coordinated by your investment banker) often take place between preliminary bids and letters of intent. In a less formal process where you are in direct contact with a potential buyer, this visit tends to take place earlier in the process. While the primary purpose of these visits is for the buyer to ask questions and learn more about the company, you should take the opportunity to get to know the buyer better and gauge how much of a two-way fit there is. Here’s what to expect and what you should be looking for when buyers visit your company:
Company Deep Dive
A buyer visit typically consists of dinner, facility tour, and a company presentation. Some buyers may give a brief presentation of their own with an overview of their firm, but the majority of the time will be spent answering detailed questions so the buyer can gain a deeper understanding of you, your goals, and your company. The buyers likely already know a lot about your business and have received basic information, but in addition to digging in deeper to the company, the site visit is an ideal setting to get to know each other and assess whether there is a good two-way fit. Remember, this is likely the first time buyers have been able to communicate directly with you; prior to their visit most of what they know about the company comes from data you’ve provided and maybe some discussions with your advisor.
A few areas buyers will want to spend time discussing include historical financials, customers, employees, growth plan, top personal objectives for the transaction, and what you’re looking for in a partner. Buyers will likely want to get granular on these topics, so take the time to review your numbers and be able to speak to historical trends or fluctuations. Give thought to these topics in advance and be prepared to answer questions and share what gets you most excited for the future. Additionally, if you aren’t personally involved in certain key areas of the business, consider including members of your management team who are responsible for those areas, such as accounting, operations, and sales. Your advisor should help you prepare for the meeting, including having answers for key questions prepared.
Let’s Get Personal
Many sellers are surprised by the amount of personal questions asked during the diligence phase, and during the company presentation in particular. Personal and cultural fit is a key consideration in how we view partnerships at Montage Partners. These visits are both the most important part and our favorite part of the diligence process. We’re looking to learn about you and your team, what drives you, what your goals are, and we use this time together to envision what it will be like working alongside you to continue to grow the company.
While a lot of attention is given to what buyers are looking for during these visits, don’t lose sight of the fact that this is also your opportunity to learn more about them and determine whether there’s a good two-way fit. Ask them as many questions as you want; some topics to consider include:
- Track record of partnering with and growing businesses
- The cadence of their relationships with companies they invest in (how often you’ll be in touch, what they expect of you, etc.)
- Where they can or do get involved at their companies and how deep that involvement is
- Their most challenging investments
- Their ideal investment horizon
- Personal questions to find out what they are like as people
Just as they are envisioning what it would be like to work with you and your team, imagine what it would be like to work with them, both in good times and bad. Could you see yourself calling them with bad news? Are they someone you would enjoy working closely with for several years?
You can also use this visit to assess how much research they’ve done or how deep their understanding of your business is. They won’t be experts – and probably never will be – but how much have they grasped about your company that is important? Have they visited your website? Are they asking good questions about the business that demonstrate their interest and excitement about growing the company with you? Even the way they are asking questions can give you insight into their personalities and what it would be like to work with them; are they asking genuine questions, or are the questions generated from a place to make themselves look smart?
Remember, you’ll be working closely with this group for years and will likely face challenges together. Trust your gut; spending 4+ hours together and sharing a meal can give you a pretty good understanding of who they are and how they’ll act in a partnership. If they aren’t asking any questions about you personally or your goals, and the visit feels cold, this could be an indication of how the relationship might continue. If they avoid questions about their track record or how they’ve helped companies, or don’t give specific answers to questions about their challenging investments, this could indicate a problematic lack of transparency.
Buyer visits are a crucial part of the due diligence process, both for the buyers to learn about you and your business and for you to get to know each potential buyer. Use each visit as your opportunity to evaluate each buyer personally and envision yourself working with them in good times and bad, looking for a two-way cultural fit.