Coaching session for sellers: initial meeting “dos” and “don’ts”
Morrissey Goodale provides coaching tips to sellers to help prepare for initial meetings with potential suitors.
As the industry consolidates rapidly, many #AE leadership teams are finding themselves doing things that they have never done before: taking meetings with potential buyers or investors. While these teams excel at presenting to clients or making internal announcements, they are rookies when it comes to engaging with potential buyers or investors. They are unsure of the protocols for these initial meetings. What should we say? What can we ask? What should we share? How do we know we are dealing with a real buyer and not a tire-kicker?
So, to help rookie sellers, here are some of the coaching tips and “dos” and “don’ts” that Morrissey Goodale provides to their clients to help them prepare for initial meetings with potential suitors.
Do: Control the agenda and location: The purpose of any initial meeting with a suitor is to mutually test strategic and cultural fit—period. Not to negotiate price, not to talk integration, not to establish terms. In our experience, an initial meeting length of 90 minutes (about the length of a good movie and definitely much shorter than any single film of the Lord of the Rings trilogy) provides ample time to establish if there is strategic and cultural simpatico. Buyers will want you to spend half a day with them; don’t do it! You don’t need to spend that amount of time to vet them, and if they are a real buyer, then 90 minutes should work for them, too. Take the meeting off-site (get a WeWork space or rent a nearby hotel conference room; they are super cheap these days), so you don’t unnecessarily raise any suspicions with employees. The suitor will want to meet at your offices to eyeball your facilities. Don’t let them on this first visit. If they appear to be a good fit for your firm, then you can let them visit at a later point in the courtship process.
Don’t: Talk politics, religion, or sex: There’s no upside to engaging on these topics in a first meeting (or in any meeting for that matter), and it never ends well. Save those topics for another time after you’ve closed your deal with the suitor or for a different social or business setting. But to be clear, they are treacherous grounds in a first meeting with a potential buyer.
Do: Be positive and be a team: Emphasize what’s good about your business. What’s encouraging about your backlog and outlook? How strong are your client relationships? List all of the positives you can about your business ahead of the meeting, and lead with those points. Approach the meeting as a cohesive team, not a loose collection of individuals. Reinforce each other’s points. Back each other up. Help each other out. Come out of the meeting a stronger team than you went in.
Don’t: Bad mouth specific clients or markets: True story—we were representing an architecture firm in New York City. In a first meeting with a potential buyer, my client declared that his practice hated working with a prominent New York developer and impugned the developer’s brand. The CEO of the potential buyer looked at my client, paused for maybe five seconds, and then stated very quietly that said developer was a valued client of their firm and a personal friend. The meeting went downhill from there. The bottom line: It’s OK to describe the nuances of working with a specific client or set of clients. But denigration of either will hurt you.
Do: Understand what you are selling: To get this point across, I always ask clients, “What does Harley Davidson sell?” The standard response is “motorcycles.” But then the veil falls from their eyes when they understand that Harley Davidson actually sells a lifestyle to a specific consumer type who has lots of disposable income and who will buy, not only a motorcycle, but all of the associated paraphernalia (bandanas, leather jackets, etc.) at a serious markup to “live” that lifestyle. You and your team need to understand that you are not just selling an architecture or engineering or environmental firm. You’re selling the opportunity for an acquirer to execute on their strategic plan OR the opportunity for a financial investor to generate superior returns on their capital by entering or growing in the A/E industry. Understand your value and sell it—hard.
Don’t: Dwell on negatives: If you’re like every other A/E firm under the sun, you have people on your team who frustrate you, offices and business units that are underperforming, and systems that are sub-optimal. Fine. But this is neither the time nor place for those topics. Any and all negative items will come out in future meetings and/or due diligence should things progress. Take the advice of the English Beat and Save it for later. Remember, in the first meeting, focus your time and energy on exploring and confirming strategic and cultural fit.
Do: Hit your talking points repeatedly: Does your biggest client have a new multi-year contract ready to launch? Great. Is your municipality about to launch a new funding initiative that will directly benefit your firm? Brilliant. Are 1000 people moving to your state on a daily basis? Bingo. Do you have a software package that differentiates you in the eyes of your clients? Love it. Do you get 10 out of 10 consistently in your client surveys? Fantastico! THESE are your talking points. This is your script for you and your team to follow and return to again and again. How many talking points should you have? I find seven to be a good number—which also happens to be Brad Pitt’s best movie).
Don’t: Tell them who your competition is: That’s their job to find out. Many so-called buyers are on “fishing expeditions” to get market intelligence. Don’t be the patsy that does their work for them. When asked who your competition is, respond with either “We’re so good everyone aspires to be our competition” or, “We can get to that the next time we meet.” (It’s OK not to answer every question.)
Do your research: Ahead of the meeting, check their website. Dig deeper to see if they have made acquisitions in the past. (Ask them about those during the meeting.) What’s their capital model? What’s their debt structure? Are they involved in any lawsuits? What are the bios of the folks you’re going to be meeting? There are multiple sources of information to allow you to be smarter about the suitor across the table.
Don’t: Inflate your performance: It’s the kiss of death to say you’re generating 20% profit when it’s really only 18%. Or that your backlog is $50 million—when in fact it’s $20 million in hard backlog and $30 million in sales pipeline. Never set yourself up where you “disappoint” a buyer by signaling a metric that you cannot meet; that will only fuel doubt and skepticism.
Do: Get the answers you need: Establishing strategic fit is easy. Figuring out cultural fit is a lot harder. Ask the buyer about their strategy. What’s their vision? How would an acquisition of your firm fit into that vision? After they make this acquisition, what’s next in terms of executing on strategy? To get a read on cultural fit, ask them what they value in their employees and in their clients. Ask them what they stand for (mission statement) and how they live that. How do they reward their employees? How did they manage through the pandemic year of 2020? What did they learn about themselves through the pandemic?
Don’t: Give them a “number”: Many suitors will push you for a valuation or price in a first meeting (even if they have not seen your financials!). A “number” is meaningless, absent a mutual agreement on other key terms, such as whether the transaction will be a stock or asset purchase or the form of consideration (cash, stock, notes, earn-out). Providing a price this early in the process puts you in a box that’s difficult to get out of and potentially forces you into a situation where you are leaving money on the table. Politely decline to provide a price (unless you have already read our June 7 article on Navigating the 2021 tsunami of unsolicited M&A inquiries) and are playing chess while the buyer is playing checkers. Instead, indicate that there will be a time and place down the road of your choosing for that discussion to take place. And if you’re feeling extra frisky, turn the tables on them to ask them what they are prepared to pay for your firm. And then have fun watching them tap dance around an answer.
The first meeting is a critical one for sellers: It can be a waste of time or a misfire. Or as Rick Blaine says in Casablanca, it could be “the beginning of a beautiful friendship.” Knowing these “dos” and “don’ts” will help rookie sellers get better results from those first meetings.
This article originally appeared on Morrissey Goodale’s website. Morrissey Goodale is a CFE Media content partner.
Original content can be found at www.morrisseygoodale.com.