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In February of 2017, I began the process of researching and interviewing investment bankers to assist BestReviews (where I was a Co Founder) in considering a sale to a strategic partner. We sold a majority stake to Tribune Publishing in February of 2018 for $110M. I learned numerous lessons as I led the M&A process over those twelve months and have highlighted below a few things to avoid.
- Letting bankers, lawyers, or other advisors run the process. Some people think that the bankers are going to do everything and create a perfect outcome, and we were fortunate to work with a great team from Lazard. Never forget you hired them as advisors, and that is exactly what they will offer: advice. In many cases, effort you put in to managing and supervising their work—and the overall process—will move the needle. It is you selling your business, so you should own it. If you assume others will own it, then realize the outcome may not be what you want, and you will be the one living with it.
- Sharing data and information widely. An NDA only means so much. We tried to be very careful about what we shared prior to engaging both with a bank and, later,with most strategic buyers. We knew full well the potential for some of the info to leak and did not want that to happen. Even without a leak, the strategic buyers could use any information we shared willingly to their own advantage both during the process and after the sale. Not surprisingly, before our sale process was over, we already saw strategic buyers who had read our Confidential Investment Memorandum replicating aspects of our business.
- Not leveraging your network early in the process. Leverage your network early. You want sponsors and strategics lined up and getting involved at the same time, and yet they each operate on their own internal time-frame, not the timing of your process. In general, there is often inertia that keeps strategics from moving, and without trust and rapport, you are offering them another reason to delay or pass up bidding. Meet people at the board level, the senior management level, and other places in the organization (like corporate development) and nurture those relationships carefully and as early as possible. If you are not traveling to build in-person relationships with key partners, you are probably missing out on potential; phone calls alone are rarely adequate.
- Avoiding hiring Advisors/Board Members. If you have a real network, then truly use it in a fair and equitable manner. Make it worth the time of people who you need help from and bring them on board. We had a chance to bring on at least one A+ member to our board, but didn’t move forward with the process, which was a mistake (and a common one across closely held companies). If we had added this person as an independent board member, we would have had much more access to senior executives inside of target companies, as well as more credibility with buyers based on the breadth of this person’s network. Instead of bankers talking to corporate development teams, our advisor could have helped make warm introductions to a leader of a business unit or influential board member. With this sort of introduction, the entire trajectory of the conversation can change. From an ROI perspective, the 50-100 basis points you may need to offer to an advisor with a 2-4 year vest can be one of the best investments that you make. The value they can create (if they have time, network, and passion for the project), will more than outweigh the costs of equity dilution Remember, running the process is a full-time job. However, you must maintain your “normal job” of managing your company, so value-add help is very accretive to value creation.
- Not listening. Even if you think you have it all figured out at the start, it is almost certain that things will change during the process, and that the way you present and message the opportunity will change. Listening to a variety of advisors, friends, and industry experts, then adjusting based on their feedback can save time and avoid repeated mistakes. In our own case, an executive coach (another advisor I might add) helped tighten our management presentation. Without listening to and heeding his advice, we may not have had a positive outcome.
- Using a cookie cutter approach for the sale process. Every process is unique. Banks talk all about running a “narrow” or “broad” process. I would recommend that you decide how the “interviewing” process for bankers and other advisors or consultants will work, then carefully manage that process. If you are structured and disciplined in this process for building the team and machine for the sale process,you will, in our experience, have less stress and a better outcome.
- Not resting. The process is a marathon, not a sprint. Take the time to care for yourself as you move along the winding path that is often a part of the journey to sale. In our case, as well as that of many of our friends’ and acquaintances’, the entire start-to-finish process approached or surpassed a year. In that time, there were multiple deals that fell apart at the last moment. You have got to keep running the entire business during this emotional roller coaster; in fact, you need to do even better since the most recent months of results can determine the price someone will pay—or if they bid at all. Hire extra talent to help if needed; there will be plenty of work to go around under most circumstances.
- Bonus: Not having fun. Selling a business does not have to be drudgery or a year spent in spreadsheets and legal reviews. Instead, with the right attitude, it is a chance to meet smart investors and amazing operators, understand more about how they think about the industry and ecosystem, and learn about yourself. All three Co-Founders at BestReviews grew at an incredible pace during our sale process, and I would not trade the experience for any that I have had in the business world so far.
Ben Faw is an Advisor at Advantary. He is Co Founder and COO (Chief Operations Officer) at BestReviews. BestReviews was Acquired by Tribune Publishing (TPCO), for over $110M in February 2018. Ben led the M&A process for BestReviews with Lazard as advisors and Morrison & Foerster as legal counsel. Ben is also a board member, board observer, or advisor to several companies.
Prior to BestReviews, Ben was at LinkedIn, Tesla, and UBS, as well as serving as an Infantry Officer in the US Army, including a combat tour in Northern Iraq. Ben received his MBA from Harvard Business School and his undergraduate degree from West Point. A similar post was originally posted on HBR, you can read that article here.
Read more about the author, Ben Faw.