While business owners decide to sell and exit their company for many reasons, one of the most common events that trigger a business owner to finally sell is when they receive an “inbound” solicitation.
In M&A, an inbound typically refers to a situation where an interested buyer directly contacts a business and asks if they would be interested in selling their company. These buyers could be individuals, direct competitors, or financial groups.
It can be flattering and exciting to receive an inbound because they generally mean your company is attractive as an investment. However, if a business owner attempts to handle inbounds on their own, the following issues can emerge:
- Having one inbound that knows they are the only bidder often leads to a less then optimal outcome
- Difficulty finding a quality buyer who will provide you the best outcomes for an exit
- Receiving several inbounds and not being able to vet the good from the bad
- Losing focus on running your business while trying to manage your inbounds
Fortunately, receiving the support of an M&A sell-side advisor means you will have a team taking over the management of inbound calls and interested parties. If you are a business owner, having an advisor who knows what to say and what information to explore with an inbound can heavily influence the offers you get.
How an M&A Advisor Can Help You Manage Inbounds
The role of an M&A advisor is to not only increase your leverage in the selling process, but to properly manage inbounds so they can match you with a buyer who is aligned with your interests.
An M&A advisor must take over your inbound solicitations and nurture them so those buyers will be heavily engaged once the bidding process starts and eventually escalates.
M&A advisors who take the time to understand the focus areas of other companies bring a lot of value to a transaction. They should have a perspective on how other players in the market are thinking about buying and selling. This will become valuable for developing a robust auction situation.
Ways an M&A Advisor Manages Sell-Side vs Buy-Side Inbounds
Sell-side inbounds are not the only type of inbound to manage – there are inbounds on the buy side, too. The difference is that sell-side inbound is a solicitation from a buyer, whereas a buy-side inbound is a solicitation from a seller.
It is the responsibility of the M&A advisor on the sell-side to perform their due diligence to prevent a situation of unpleasantly surprising potential buyers. By positioning a company to be as attractive as possible to attract competing buyers, the advisor can orchestrate an auction process to sell the business for maximum multiples. For buy-side inbounds, however, the best strategy is to be less reactive in nature and more focused on a single target.
Regardless of strategy, maintaining honesty and integrity is key for an advisor who is engaging outbounds on the sell-side and the buy-side.
Why You Need to Understand Buyer Motivations
Ask yourself a few questions to figure out what your desired outcomes from selling are. Is the longevity of your employee base top of mind, or is the legacy that you leave behind more important? Knowing what is crucial to you makes it easier to figure out what type of buyer you should pursue from inbounds.
To start, consider whether an inbound is a strategic buyer who will maximize the integrated value of your company into theirs, or if they are a financial buyer who wants to buy low before other bidders get involved.
Here are a few questions to ask about a buyer:
- Is the inbound party asking the right questions?
- Are they a real contender with honest intent?
- Have they done their homework on your industry?
An M&A advisor should seek buyers who will meet your desired outcomes by having a formal M&A process with rigorous execution diligence and early preparation. When the time comes that you accept an offer and the purchase agreement is finalized, all participants on the buy side must understand what they are signing up for when acquiring a business.
How STS Can Help You Manage Inbounds
To effectively manage inbounds, especially on the sell side, you need to educate yourself on what to look for in both a buyer and in an M&A advisor.
STS Managing Director John Kirkpatrick suggests finding an advisor who will help prepare you and your business for the exit you want – even if that is 1 to 2 years in advance. This gives you time to perform actions that will increase your valuation, such as purchasing a competitor or getting finances in order.
Kirkpatrick also recommends finding an advisor who will satisfy your needs beyond the numbers.
“While money is important to everyone, the structure of the deal can be equally or even more important… and this is what an experienced M&A advisor brings to the table,” said Kirkpatrick. An advisor should also know what the seller really wants so they can vet the inbounds appropriately.”
With years of experience overseeing transactions, Kirkpatrick and the entire STS team understand that managing inbounds is an integral part of the M&A process. Any inbound solicitation you receive may become the eventual winning bidder, or it may be the inbound that inspires the search process for a buyer to begin.
Are you interested in finding more information about managing inbounds? Please get in touch with us at ExpertGuides@stscapital.com.
