If you’ve been reading along in this 30 Days to ETA series, you know that in the Day #24 post I identified as an Acquisition Entrepreneur that seller personas and industry specifics are not enough in your Mergers & Acquisitions journey. You’ll want to know how to rip apart all of the information you receive as a part of due diligence. The center piece of this information is the Confidential Information Memorandum, or CIM as an Entrepreneurship Through Acquisition professional (You can read the previous post by CLICKING HERE). But your ability to analyze reports, or the CIM is not enough. You’re going to have to conduct interviews with key parties on the seller’s side of the equation successfully. These interviews need to be done so that you gather all of the missing pieces of information you need to proceed — if justified. So, in today’s 30 Days to ETA post, we’re going to explore The ETA Owner Interview… Enjoy!
The ETA Owner Interview
Congratulations! You’ve found a business that your initial review leads to an interview with the owner. Depending on their savvy, and their ability to be coached by their broker, you may or may not get the truth about the business that you are exploring acquiring. What? Sellers may or may not provide the truth? The sad, but true answer is that they don’t always provide the truth, but don’t always lie about what they are sharing with you. You see, I’ve investigated several businesses that when it came down to what the current state of the business is, their responses were anything but truthful. Unfortunately, I’ve had those conversations that only later, when digging through piles of data or conducting client or employee interviews prior to Purchase Agreement (PA) the truth was a long way off from what/where we were looking!
One business projected a ton of blue sky, meaning that the sky was the limit and the multiple that they wanted for the organization was equally oriented to blue sky figures — It was one of the highest valuations of the year that we considered purchasing businesses! The reality though was something completely different. You see, their company leaders as a result of selling the business were left scrambling about, trying to keep up with the documents, guided tours, phone calls, and entertaining every whim of the buyer’s team. That meant that the business, or the rest of the company was left unattended for the majority of the hours, days, and months the team leaders were preparing for and attending these selling meetings. Performance falls. Customers leave. Revenue plummets.
Because the owner of the business pulled their leaders into the selling process, the people who ran and were employed at the company began to suffer. It was devastating, and it could have cost me and my firm a ton! Had we purchased the organization we would have found that in doing so we would have lost their biggest client and some of their best employees.
The Seller’s Intent during the ETA Owner Interview
By the time you get to the owner interview, as I’ve said earlier the buyer will have assembled their internal and external team players for the sales transition period. They’re not going to make rookie mistakes — They think — and they have a seller’s playbook ready for you — The potential buyer. What could go wrong with that?
The seller’s playbook is a standard answer to just about every question you could ask. And it’s a sales pitch prepared exactly for you as the ETA! For example, the question most frequently asked of sellers is, “What are you going to do next?” The seller’s typical response, “I’m going to retire.” I’ve met some pretty incredible business people in my day. Ones that I would have thought could actually retire if they wanted to. However, most business owners that aren’t of appropriate age are not going to retire after they sell the business. So why do they tell you that they are going to sell the business and retire? Because that’s what the seller’s playbook tells them to tell you — There are less questions asked afterwards, and that’s exactly what the seller wants!
Remember, the seller and their team is ready for you as an Acquisition Entrepreneur. They’re sitting across the table with pen and paper, taking notes on your every word, waiting to find a crack they can exploit in your ETA approach. They know their company is valuable, but they want you to find reasons to offer an even higher price to save themselves time and money.
5 Tips for Nailing The ETA Owner Interview
So how do you prevent cracks from showing during your ETA Owner Interview?
- Choose a well-spoken presenter – Typically you, the ETA, or another member of your team, but make sure you have a speaker who is good on their feet. Make sure they can answer most of the questions about the business owner you are interviewing or return the answers to questions they does not know with additional questions.
- Practice, practice, practice – Practice makes perfect, so go over and over again the multiple questions you have before the actual ETA Owner Interview.
- Answer their questions – Ensure you answer the seller’s questions truthfully and succinctly. You don’t want a 10-minute answer to a two-second question. You do want to answer their questions in full.
- Practice on the indifferent – Find an audience that has zero skin in the game (something I like to call the indifferent – They don’t care one way or the other). Practice your ETA Owner Interview to them for feedback. Then take notes on their constructive feedback.
- Bring your A-Game – You’re an ETA and you’re goal is to buy a business. This is not the type to phone-it-in! You have to conduct the best ETA Owner Interview you possibly can.
In today’s 30 Days to ETA post, we explored The ETA Owner Interview. Why? You’re going to have to conduct interviews with key parties on the seller’s side of the equation successfully. These interviews need to be done so that you gather all of the missing pieces of information you need to proceed — if justified. So congratulations! You’ve reached the point now where you’re actually conducting an ETA Owner Interview to buy a company. The key? Prepare yourself and your team!