Listen to searchers, dealmakers and legal counsel discuss a few of the 52 tactics shown below.

No matter where you begin, no matter the order in which you evaluate, you’ll need to control numerous dealmaking variables.

It’s like Whac-A-Mole.

You think you’ve handled one or more and then later one or more pop up again . . . requiring you to do a double-take. It happens because most variables affect some of the others.

The better you control the variables, the more likely you’ll achieve a done deal. And a better deal. Sooner. In any kind of marketplace.

Particularly eye-opening is what legal counsel said about landlords and personal guarantees.

Who’s selling whom? Beware of a disabling or fatal case of business buyer fever. Right now buyer fever is raging. It’s contagious. It’s fueling unhealthy competition among business buyers. And that plays into the hands of sellers.

 

Is value increasing or is it merely pricing that is increasing?

Business brokers, among others, are saying businesses are selling at increasing multiples of profit (or whatever).

Some competing buyers are “successfully” outbidding ignorant searchers.

Seems like a good way for “winning” to be losing, doesn’t it?

How do you know when it’s a seller’s market?

• You believe it when people say so.
• The seller is attracting buyer competition.
• You’re in a bidding war.
• The seller is better than you at presenting and dealmaking.
• The seller’s advisory team is better than yours.
• You wouldn’t be hired if the company was advertising for a general manager.
• The seller isn’t convinced you can successfully migrate from what you’ve been doing into the company.

Will buying the bubble burst your business acquisition?

Too many people buying small and midsize businesses are falling for the nonsense being pitched by sellers. Even worse, we’re seeing so-called business appraisers, in their reports, mostly or totally ignoring the effects of Covid on whatever business they are “valuing.” And, some lenders, in the rush to approve unrealistic loans, are further putting at risk buyers.

There’s a surge of business sellers, wanting to avoid losing to rising costs for labor and materials. They’re hoping buyers will compete to pay a premium price for their company during the “seller’s market.”

Timing seems right, because there’s also a surge of people looking to compete to buy SMBs.

The better you control the variables, the more likely you’ll achieve a done deal. And a better deal. Sooner. In any kind of marketplace.

Let’s consider these variables to help you navigate during these confusing and risky times.

1. The pandemic has created a seller’s market for some kinds of businesses.
   Owners wanting out. Buyers wanting in.
2. Begin searching ASAP, but . . .
3. Don’t join your buyer competition unprepared!
4. Understand the game for a seller’s market.
5. Work from a proven plan to attract more opportunities.
6. Be the first choice of brokers, sellers and lenders.
7. Expect an emotional rollercoaster, for you and sellers.
8. Learn how to search, evaluate and negotiate for companies; better than your competition.
9. Specify the exact kind of deal you want to achieve. Financial, operational, growth. Exit.
10. Don’t restrict or otherwise throttle your search or your opportunities. But . . .
11. Quickly screen sellers (and brokers) rejecting poor matches.
12. Don’t delegate your search to finders.
    [Email me if you want an expose.]
13. Narrow your acquisition criteria to what is certain to work in your favor.
14. Always have at least two doable deals in motion. LOI, at the minimum. Lenders green lighting.
15. Buying and selling businesses is seasonal for many sectors.
16. Some highly attractive companies (and sectors) are poised for a major setback.
17. Hire the right advisory team before searching. Playing catch-up won’t work in a seller’s market.
18. Time is of the essence. Don’t dither or permit anyone to unnecessarily delay progress.
19. Time-on-market may mean the opportunity is being rejected by more-informed buyers.
20. Weigh what’s most important against minutia.
21. Be first on scene. And maybe last.
22. Don’t expect your first offers to be accepted.
23. Expect to lose to buyer competition.
24. Relationships trump everything else. Quickly get face time with sellers.
25. Offer the kind of post-completion relationship that sellers want.
26. Price is rarely dominant. Your appeal. Your plan. Timing. Contingencies. Financing. Transition.
27. Don’t run away from competition. Beat it.
28. Encourage sellers and brokers to prove the validity of competing offers.
29. Don’t present yes-or-no propositions.
30. Don’t ask for the moon. Reasonable concessions, contingencies and timelines.
31. Sellers don’t like contingencies, especially for legal review, financing or appraisal.
32. Don’t argue about non-significant things or unnecessary deal killers.
33. Entice brokers to prefer you.
34. Ask brokers what they will do to facilitate your deal.
35. Show evidence of your financial capability.
36. Expect to pledge your personal guarantee, but limit its scope and duration.
37. Tout your advisory team.
    They must be capable. And pass the seller/broker Google test.
38. Expedite presentation and acceptance of LOIs and purchase offers.
39. Get evaluation / dealmaking exclusivity from sellers and brokers.
40. Make simple-to-understand offers.
41. Minimize contingencies in offers, but include escape clauses.
42. Consider an Escalation Clause:
    Commit the seller to notify you and give you the opportunity to compete.
43. Expedite due diligence.
44. Don’t be the one to abort the deal.
45. Leave the door open for a return.
46. Don’t negotiate against yourself.
47. Don’t accept the seller’s don’t-wanter unless you’re certain the company will perform for you.
48. Don’t settle for a dumb deal.
49. Become a better searcher.
50. Go direct to owners, preferably not yet for sale.
51. Paying reasonably more “than it’s worth” can make sense
    if you keep in mind your lost income opportunity while searching.
    It helps to know how to quickly and safely reduce costs, increase revenue and profit.
52. Ask yourself:
    Can I live with the set of circumstances this business will convey to me if I buy it? It helps to have a practical plan for mitigating risks, including doomsday and cash flow contingency plans.

• It’s nearly always a seller’s market for some sectors.

 

Never forget your lost income opportunity.

Irrationally deferring completing an M&A transaction presents at least two kinds of (avoidable) potential losses. (1) Missing out on buying the best opportunity that you’re going to find. (2) Lost income opportunity, which is what you would have earned every month longer it takes to complete your deal.

Tip: Search more effectively to find and complete better deals sooner.

 

What about Business Buyer Competition?

What’s your competitive advantage?

See how to avoid or beat it.

Ted’s Story

I bought the wrong business the wrong way. Decades ago. And then I learned how to buy the right businesses the right ways. 12 of them, which I sold for a profit.

Over the last 30 years, more than 100,000 entrepreneurs and advisors, worldwide, have relied upon my books and trainings to creatively finance, buy or sell small and midsize businesses. I’ve privately coached more than 1,000 clients so they could avoid mishaps and make better deals. And, I’ve trained 298 independent advisors, so they can better-serve people buying and selling businesses.

Improve your search and dealmaking:

Schedule an hour of coaching with Ted Leverette, The Original Business Buyer Advocate ®

Email Ted J. Leverette, The Original Business Buyer Advocate ®. “Partner” On-Call Network, LLC