M&A Transaction Tips: How To Ace An Intro Call With A Buyer

M&A Transaction Tips: How To Ace An Intro Call With A Buyer

You’ve done your research, prepped your financial materials, honed your elevator pitch, and now it’s time to connect with a potential buyer! Meeting prospective buyers is an exciting part of an M&A transaction, but it requires thoughtful preparation in order to ensure a productive conversation for both parties. Use these tips below as a checklist before preparing for your next call.

M&A Transaction Checklist: Buyer Intro Call

  1. Minimize Distractions: It seems obvious, but find a quiet place with a good internet connection. If you work from home, buyers understand some limitations, but eliminating distractions and noise will help you make the most of your time! Ensure that your background and surrounding environment look professional. 
  2. Leave a Lasting Impression: Enter the conversation with an infectious, positive attitude, and let your personality shine through! Buyers want to connect with you as a person and potential professional collaborator, not just a business entity. So, lead with charisma during the call to leave a lasting impression that resonates. 
  3. Dive into the Details: A little research can go a long way. By demonstrating your knowledge and enthusiasm, you'll captivate the buyer and create a compelling case for collaboration. Make sure you know who will be on the call and what their role is specifically within the organization. 
  4. Harness the Power of Preparedness: Arm yourself with essential documents that hold the key to success. From crucial financial metrics to client data and team information, ensure you have everything at your fingertips. Your M&A advisor can lend a hand in ensuring you're well-prepared to answer the buyer's inquiries and follow up after the call to close the loop on anything that you were unable to answer.
  5. Curiosity Fuels Success: Similar to a job interview, the buyer will likely set aside 10-15 minutes at the end of the call for your questions. So, before the call, brainstorm the information you'll need to make an informed and assured decision for your business. Your thoughtful queries will demonstrate your dedication to facilitating a successful M&A transaction.
  6. Active Listening: During the call, actively listen to the buyer's needs and concerns. Show genuine interest and empathy, and ask open-ended questions to encourage them to share more information. Remember, this is more than an M&A transaction you're trying to close, it's a relationship you're fostering. By staying engaged, you'll be able to customize your pitch and recommendations to precisely match their unique requirements.
  7. Overcome Objections: Equip yourself to gracefully handle objections or points of concern. Rather than brushing them off, embrace objections as stepping stones to provide thoughtful responses that ease concerns. Utilize persuasive techniques, such as presenting compelling evidence or sharing glowing client testimonials. These approaches will instill confidence in a buyer's decision to proceed in an M&A transaction with you.
  8. Reflection: Take time after the call to summarize your thoughts while they are fresh in your mind! Be sure to note the aspects of the conversation that you enjoyed and anything that gave you pause or concern. Share these takeaways with other key players, such as your M&A advisor, and be sure to get their feedback on the conversation as well. 

Most importantly, remember to keep an open mind during any conversation with a potential buyer! Sometimes the conversation can take a turn that surprises you and lead to an incredible future partnership.


5 Terms To Know Throughout the M&A Process

5 Terms To Know Throughout The M&A Process

The M&A process can be a transformative opportunity to increase market share, drive operational efficiencies, and unlock growth opportunities. However, embarking on this journey requires more than just ambition. Having a clear understanding of the process and key terms used in the space allows for informed decision-making to drive a successful transaction. 

Key Terms To Know Throughout the M&A Process 

EBITDA: The abbreviation for Earnings before Interest, Taxes, Depreciation, and Amortization; a calculation used to express cash profit. Essentially, this is your net profit plus additional expense adjustments that a prospective Buyer would not incur. When valuing an agency, Barney utilizes a multiple of EBITDA to determine your agency's total enterprise value.

Letter of Intent: A non-binding letter that outlines an introductory commitment to do business with another entity. The LOI serves as the blueprint for the transaction between two parties and defines the purchase price, structure, and deal terms. The Barney acquisition team will help guide you through these offer letters and negotiate the most ideal terms on your behalf.

Deal Structure: The financial terms, conditions, and obligations of both the buyer and seller to guide a smooth transition of business ownership. The funding mechanisms outlined in a deal structure are the buyer's tool to “bridge a valuation” gap between the total enterprise value and the available cash they have on hand. Most deal structures will include some combination of the following components - cash at close, seller’s financing, earnout, rolled equity, and phantom equity. Barney’s role is to advocate for your preferred deal structure which usually includes the highest amount of “guaranteed funds” - cash at close and seller’s financing.

Working Capital: The difference between an entity’s current assets and current liabilities; overall the amount of money needed to run the day-to-day operations of a business. Buyers will typically ask for 2-3 months of operating income post-transaction so that the ownership transition does not hinder business operations. Barney will help guide you through all of these house-cleaning steps at the end of the due diligence process.

Earnout: This is the potential portion of the purchase price where payment is contingent upon the company achieving predefined milestones within a set period of time following the transaction. Typically, performance metrics tied to top-line revenue are more advantageous for a seller than those tied to EBITDA. The Barney acquisition team will ensure you are well-informed regarding the obligations of any proposed earnout period and advocate for terms that align with your financial projections and transition timeline. 

The M&A process doesn’t have to be  daunting! With guidance, advocacy  and support from a qualified advisor, it can be an exciting opportunity to launch an agency and its founder into a new chapter of opportunity.


Optimizing Agency Accounting With Fractional CFO Services

Optimizing Agency Accounting With Fractional CFO Services

Running an agency requires you to be intimately involved in the day-to-day operations and pulled in many directions. A fractional CFO is able to provide assistance on both the intimate details of financial reporting and accounting, as well as advisory and guidance on the overall strategy and direction of the business. This dual perspective is invaluable during the acquisition process to a) set you up for success in regards to having all of the necessary financial documents ticked and tied and b) to consider the big picture implications as you prepare to sell your business.

Four Ways Agency Accounting Benefits From Fractional CFO Services 

Cost

The cost of hiring a fractional CFO is significantly cheaper than the salary of a full-time CFO. Your agency accounting efforts will benefit from the financial expertise of an experienced CFO without the commitment and strain of a full-time employee. Buyers want to see clean books and records, so investing in this prior to starting the acquisition process inevitably saves time and headaches during the due diligence process.

Specialized Experience

Problem solving is an invaluable skill in the management of a small-business. A fractional CFO not only provides financial acumen and streamlined agency accounting, but extensive experience identifying issues and implementing processes to solve them. It’s important to identify an individual who has experience with agencies of comparable size to yours, as well as industry experience. 

Flexibility

The advantage of a fractional CFO is that their involvement can be tailored to the level of attention your agency accounting efforts require. In the case of preparing for a sale, this person can be utilized to ensure all of the necessary financials, including balance sheets and P&L’s, are prepared with the appropriate amount of detail. Having the ability to quickly pull various financial documents as potential buyers request them, helps to streamline the process and keep momentum.

Perspective

If your agency accounting efforts need enhancing, a fractional CFO can provide experienced counsel and a fresh perspective which can help optimize processes to make them more efficient and cost effective. Having clear systems in place is very valuable to prospective buyers and signals that the agency can run independently of any individual. While the process of selling your business may be confidential, it’s helpful to have another executive who is aware of the sale and can provide support and financial information as needed.

Take Action

Maintaining clean, cohesive, and organized financial statements are crucial to a successful sale of your business. Hiring a fractional CFO to guide your agency before and during the process is an effective use of time and resources to ensure a smooth exit.


How to Grow The Value Of Your Marketing Agency Without Raising Revenue

Top-line growth is only one end of the P&L statement. Agency owners that are not just sales-minded but understand operations just as well, know that their margins can be improved elsewhere too. Although an early-stage agency will need revenue to demonstrate traction and proof of concept, a company with enough track record – and one that is looking to sell – needs to do better than that. EBITDA will take center stage for a buyer looking under your financial hood – and there is plenty of ways to raise the roof on your EBITDA without having to drive sales. Especially in the current market environment that is still demonstrably shaken up by the ongoing pandemic, structural readjustments and remote work are redefining operations. If you are looking to drive up your bottom line as you line up a sale, we recommend you take a closer look at our five hacks to grow the value of your marketing agency without the need to raise revenue. 

Five Hacks To Grow The Value of Your Marketing Agency

The Roof Overhead is an Overhead

Office leases, in particular, are dead weight in the current market environment. Long leases are not integral to the business of most marketing agencies – something that is especially obvious since 2020 and the proof of remote work as a key component of agencies in the digital age. As tools to work remotely become smarter and employees become more accustomed to them, it is worth reconsidering if that office lease or that prestigious address on the business card are worth their costs. No less, co-working spaces, insofar as they are open for business, offer a smart and flexible alternative. Why not survey your team to see how many days a week they would be happy working remotely and scale down accordingly? 

Automate Where You Can

Automation and streamlining are essential ingredients to your margin improvement. Revisit your processes, workflows and operational architecture to check on where there is still room for automation improvements. Tasks that should raise the automation flag include tasks that involve compliance and audit trails, that require multiple people to execute or that are especially time-sensitive. 

From invoice generation to time tracking and from automated workflows to streamlined communication through project management tools with automated notifications, the world of process automation is yours for the taking. Things to keep in mind are that no tool is a cure-all and any tool is only as good as its implementation. Set goals, assign accountability and measure your results over time. Your reduced likelihood of error and improved productivity will work its way into your margins in the medium to long term.  

Improve Your Brand & Increase Prices

When was the last time your brand got a shake-up? Are your website and your logo still a little too close to when you first launched? It shouldn’t take a Fortune 500 company in the public eye to make rebranding relevant. Give your look and feel a lift that will strengthen your positioning as you gear up a sale – and that can help you justify giving your prices a lift along the way.  

Invest In Your Team

Most importantly, take a good look at your team. They will be the ones carrying your agency not only over – but past – the finish line as you execute on a potential exit. Who are the top-tier candidates that will shoulder your agency and drive the marketing agency at this critical juncture? Invest in these individuals and shed any excess weight as you close in on the valuation home stretch and grow the value of your marketing agency. 

Future-Proofing In Times of Crisis

It may be a cliché, but that doesn’t mean it’s not worth taking note: there is opportunity in crisis. Even if you are not looking to make a sale just yet, these are things you can do to improve your operational resilience. Take advantage of the current reshuffle. Let it serve as an eye-opener as to how to cut costs and restructure your agency to help bring the value of your marketing agency to where it needs to be so you can turn it into a listing no buyer would overlook.


How To Evaluate Your Digital Marketing Agency Like A Buyer

Think Like A Buyer When Evaluating Your Digital Marketing Agency

Did someone say, “seller’s market”? Yes, indeed, we did. Now, does that mean your agency is automatically at the top of every potential buyer’s list? Unfortunately, not. Or, “thankfully not”, is what we ought to be saying since making the right kind of match happen is where long-term success rests. In other words, long-term success is about making sure that you don’t even begin the buyer-seller dance with buyers who aren’t suited for your offering. So, how can you make sure that there is an alignment of offer and potential buyer, how can you improve your digital agencies valuation, and finally, does your agency offer what a buyer wants? 

Think Like A Buyer When Evaluating Your Digital Marketing Agency

We’ve put together a list of key items that will entice just about any agency buyer, and that an agency owner can consider as transactional glue on their way to seal the deal. 

Retainers Over Projects: Retainers spell income visibility. Projects, while potentially lucrative in the short term, also spell potential volatility. To keep them coming in, the required sales effort and associated costs add to the challenge of making a dependency on projects look like an attractive prospect. Of course, a mix of both is not in and of itself unattractive, but keep the balance solidly tilted on the retainer side. Pay special attention, all you SEO and PPC agencies, as this speaks directly to your business model.   

Year-Over-Year Growth: This isn’t Silicon Valley, and your agency is not a SaaS startup. Agency buyers are not the VC types looking for triple-digit percentages growth. Steady does it – because steady growth means managed growth. It means your growth was not part of a fad or a fluke. And it means that your growth is not only sustainable but responsible. Growth is not an isolated metric; it’s tied to everything from hiring and overheads to your value proposition and your sales cycle. When all these things are in line, your year-on-year growth will be a sign of stability, skill and success.

Sustainable Margins: In line with this kind of well-managed growth, come sustainable and reasonable margins. Reasonable because repeatable. No buyer wants one-off success. Buyers are looking for structured businesses, not side gigs. That means functioning operations and an engine room that keeps churning out an EBITDA of 20-35% – with some margin for crisis-based deviation.  

Processes Over Relationships: Processes mean success is business-owned and won’t leave the business as an owner takes their final bow. Success that is tied up in specific relationships, is not transferable – and not repeatable. Think of it this way: can a new owner, with the same skills as the current one, continue to scale your agency? That’s your litmus test right there. 

Challenge Yourself to a Pre-Mortem and Improve Your Digital Agency Value

There are plenty of buyers available on the market right now, so that won’t be where the failure to sell your agency lies, so challenge yourself to this pre-mortem scenario: it’s 6 months from today and you weren’t successful in finding a buyer in spite of actively trying to sell your agency. What did you do wrong? Turn our buyer’s wish list into your seller’s checklist to improve your digital agency value and make sure your agency’s offering is aligned with what buyers are after. 


Agency Acquisitions

Shifting Your Mindset For A Success Agency Acquisition

If you're trying to sell your agency, you’ve met them by now: those potential buyers who have dollar signs for eyes, calculators for hearts, and bank vaults for souls.

You’re not the judgmental type. You’re out to get the most value from an agency acquisition and you’ll give the highest bidder the benefit of the doubt. But this type of buyer prospect rubs you the wrong way.

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