Smart sellers will get input from internal and external
partners before the deal moves forward. The opinions of the
management team, board, key employees and trusted customers should all factor into the decision; early buy-in from
those stakeholders is critical to the lasting success of the
deal. Stewart says the seller should also talk to the CEOs of
other companies the investor acquired. The seller’s banker
and auditor are also good intelligence sources. Third-party
consultants are particularly useful during due diligence to
evaluate cultural fit, says Michelle Mikesell, managing director of midmarket consulting and development at Insperity.
“They don’t have a stake in the transaction, and they don’t
have a real bias,” she says.
Mikesell advises clients to look for red flags in the initial
meetings between buyer and seller. She recommends that
sellers pay close attention to any disagreements. While tension during negotiation is normal, too much friction could
be a bad omen. “Think about the climate of the transaction
and if there’s open communication during the due diligence
process,” she says.
Not surprisingly, sellers can be very protective of their reputation, especially when their name is on the door. “It can be
a very emotional process, particularly for owner-operators,”
says Ramsey Goodrich, a managing director with investment banking firm Carter Morse & Mathias and a board
member of ACG Global. “The buyer needs to embrace what
made the company special in the first place. They need to
know the value of the brand,” he says.
If owners and other senior executives stay on after a sale
is completed, they must recognize that the culture will likely
change, says Allie Harding, a consultant specializing in
corporate transitions. “Moving into a larger firm, which is
almost always the case with a low-to-mid-market M&A deal,
means the owner might have to operate and adapt to ways
that often run contrary to their natural wiring,” she says.
Consultant and Researcher,
Managing Director, Consulting
and Development, Insperity