How to convert a lead into a serious bidder for your company

You made a shortlist of potential buyers for your business. You researched them, and started building relationships with some.

Then you sent a load of personalised emails out, telling them that you are considering an exit and asking if they would like to meet. (There's more detail on this process in step 4 of Four steps to get buyers interested in your company.)

Now the replies are rolling in...

What you do next is critical.

You need to carefully nurture these leads – from curious and maybe-keen, to a keen buyer making a formal acquisition offer for your company...

Do this right, and you'll land in M&A heaven: multiple, high-quality potential buyers who will move quickly, pay a good price and give you decent terms, bidding up the price against each other.

We'll break down the steps here.

👉 Review the Nos

First, you need to review feedback from your outreach to see who might be genuinely interested in making a bid. If you've done your outreach right, you should get a very high response rate to your messages – up to 50%.

You need to prepare yourself for a lot of Nos. The vast majority will turn you down.

Doing an M&A deal is rare for many companies, and you need to have contacted them at exactly the right time, and buying you needs to closely fit their strategy (see here).

So don't be deterred. That's why you need a lot of leads at the top of your outreach funnel.

However, you should carefully evaluate the negative feedback to look for specific issues or common themes that are coming through.

The most common are:

1️⃣ Size. Buyers will turn you down if you are too small for them. Beneath a certain threshold, you can't make a material impact on their business, and may not be worth the time and cost of the M&A process.

2️⃣ Profitability. Some buyers have a strict rule on only buying profitable businesses, or businesses with a certain margin profile.

3️⃣ Market. You might hear complaints about the state of your industry or wider market conditions as a reason not to proceed. High costs of borrowing, uncertainty in Government, unstable regulatory conditions are common examples.

If you are seeing the same objections over and over, you might want to reconsider if the timing is right for you to get the optimal outcome. For example, if buyers are pushing back because you are still loss-making, it might make sense to break through the profitability barrier and then come back to market later.

Note – you might not have shared any financial information in your first outreach, so this feedback may come a little later in the process.

👉 Share data by email

Often those who are interested will come back and ask for a little more information by email before committing to a meeting.

That's usually high level financial information to qualify the deal – seeing if you pass their criteria for doing deals as mentioned above.

You might feel like you're stuck in a chicken and egg situation here. You have to share some data to get them keen enough to meet, but you are nervous about giving out information to others in your industry before you know they are keen.

It pays to be generous with information here. You need to create the interest and the momentum if you want a deal to happen. If you're still worried, giving ranges or only sharing the most high-level numbers can help. For example: "We'll share detailed financials later in the process, but we have just crossed £3m in annual revenue and have been profitable for the last two years."

At this point, if you haven't already you might want to share a 'Teaser' document (which we also discussed in Four steps to get buyers interested in your company). This is a one-page summary document, with a brief background on the company, details of the product and management and very high level financials.

Your M&A Advisor, if you have one, will lead on getting this ready.

👉 Sign NDAs

A small point - you should sign an NDA with each buyer at this stage to protect the confidential information that you are about to share.

It's a necessary step in the process, but you shouldn't fall out with a potential buyer over an NDA... Many sellers want to negotiate this very aggressively to 'set the tone' in the deal and look strong. But it's easy to come across as aggressive, unreasonable and difficult to work with. That can kill the buyer's appetite, or even kill the deal, before it has even started.

So get a reasonable version sorted, quickly. More on this, and some other tips here: Don't make this NDA mistake.

👉 Hold first meetings with potential buyers

If you've done these first two steps well, you'll get some requests to meet.

This is a major milestone in your acquisition journey – you have a potential buyer who's interested enough to meet.

The first meeting will usually be a video call or a face-to-face coffee meeting between you and the buyer's team. That could be with a member of their M&A team, or with the Sponsor from their business unit.

This is an informal conversation where they aim to learn more about you, the business and why you are considering a sale.

It's obviously a great opportunity to showcase the business you have built, get them excited about a deal and for you to gauge their fit with you as a potential acquirer.

If you've raised funding before, it will feel similar to the first chat you had with potential investors. They won't be expecting a full presentation at this stage, although it's useful to check this with them beforehand.

The goal here is simple: you want to get them interested enough to move forward into the next phase of the process – which is getting into the details of the business to evaluate making a bid.

But here are some quick tips:

• Try to meet face-to-face, if you can. You want them to get excited about you and the business, and that excitement is much easier built in person. If you need to get on a plane, do it.
• Take the first slot they give you. Time kills deals, especially before you have built up any momentum or excitement with them. Try to get the meeting scheduled ASAP.
• Do your research. You should come to the meeting understanding their business well, their previous acquisitions, and know about the person you are meeting. That's a lot of work if you have 10+ of these meetings, but it has to be done.

👉 What comes next?

If these meetings go to plan, you will then be moving multiple potential buyers through an initial due diligence process as they start to consider making a bid. More on that soon...