Greetings & General Deal Advice

Greetings SearchFunder community,

As an M&A Advisor who recently lead the entire acquisition process for a searcher, would love to offer some key points of advice to others who are searchers and/or SMBs looking to buy a business:

Break through that Broker Wall + Searchers and SMBs often encounter several challenges when working with brokers. These include limited access to high-quality deal flow, lack of tailored guidance, and brokers prioritizing volume over personalized match-making. As a result, searchers may find themselves with deals that don’t align with their goals or business strategy, leading to missed opportunities or suboptimal transactions. Additionally, brokers may not always provide the necessary support during negotiations, which can leave searchers and SMBs at a disadvantage when it comes to securing the best terms.

My advice: Be mindful when using a broker and consider approach. Being able to speak to language of people in the space (such as focus on multiples and growth potential for entity) goes a long way. As an M&A Advisor for the searcher I worked with, I was able to source a good number of deals through a network of brokers and investment banks plus proprietary deals that lead to consistent deal flow for the searcher I worked with to use. This is not to dissuade anyone from using a broker, just some key considerations to keep in mind.

Fair Minded but Firm & Organized

I would put deal structuring, negotiation, and due diligence into this bucket. These are critical areas that really make or break a deal particularly once the time for an LOI arrives. From cash flow analysis to transaction documentation negotiation and proper due diligence, it is critical for a searcher and/or SMBs to ensure they are fully aligned internally on these matters. If not, there is a tremendous risk that could be taken on.

For the deal I completed, I worked to ensure the validity of the cash flows, worked closely with legal counsel on drafting and finalizing legal agreements and coordinated amongst the various stakeholders (lender, seller, legal counsels and QoE firm to name a few). I also ensured to be firm but reasonable in negotiations cause both buyer and seller are aligned in trying to execute the transaction on the best terms possible without being see as overreaching.

For people not full time searching or SMBs leaders focused on running a business, one theme that has arisen in my conversations is the lack of guidance for these after LOI resources.

My advice: Reach out to M&A Advisors and people in the M&A community on these key areas. Even before considering whether to move forward with an Advisor, ask how the Advisor(s) handle coordination on these items or even best advice for how to do so in general. It could save you thousands (possibly millions) if you at least ask those questions before reaching/commencing this stage in the acquisition process

I will leave it there for now (if there is interest, I can do a more tailored post on different sections within the acquisition process), but want to offer general advice to the community here as I know there is strong sense of excitement for searchers and/or SMBs looking to grow and acquire businesses. I want to make sure you at least have some key items to keep in mind.

Open to any questions/comments you have.

Regards,

John Ch