Who's on your buyer's team?
To get your deal done, you need support from across the buyer's team. Here's who's critical and how to get them on board.
There's a major mistake that company owners make when thinking about buyers.
They talk about ‘The Buyer’ in the abstract, and treat it a single entity.
They forget that decisions are made by a wide group of people within that buyer. There's a complex web of individuals, involved in the deal in different ways at different stages. And these people all come with their own goals, prejudices, pre-conceived views, problems and career aspirations.
If you want 'The Buyer' to make you a good offer, you need to get support from across this web of people. You need the vast majority to be supporters of the deal and to speak positively about you. You're then pushing the deal downhill. Things will move quickly and you'll get good terms.
But if there's resistance – even from non-decision makers – you will need to start pedalling uphill.
So it's critical to understand who you'll be dealing with on the buyer's side, what they care about and their role in getting the deal done.
In this article, we explain the key people within the buyer, their role in the deal and what you can to do to get their support. We'll do that in rough order of importance, starting with the CEO and working down.
If you understand these points clearly, you increase your chances of getting the buyer to bid, with a good price and terms, and get them to follow through.
This article considers strategic buyers – that means another company operating in the same or similar market. For a financial buyer like a PE fund, there's a different set of people with different roles but the same principles apply. See the last section for some notes on them.
Building the org chart
But before we dive into the personae, a note on how to practically use this information...
Once discussions with a buyer are kicking off, the best-prepared sellers (or their advisors) will start to build a rough org chart of the buyer.
That will list out out the people in the roles we explain, plus any other key people. For each you want to build out a profile of who they are, what they care about, what relationship you have already, and a plan for how you are going to get to know them.
If your company sells enterprise deals to big corporates or governments, this is similar to a 'stakeholder mapping' exercise you might do as you look to wrap about them to get the sale across the line.
As the deal progresses, you want to check back on this and see how you are progressing, where you might have issues and what you can do to address them.
CEO
The CEO may or may not be directly involved in the deal. Some CEOs just love the excitement of M&A and want to get involved in all the details... whilst others will be happy to delegate.
It also depends on the size of the buyer, whether they have a dedicated M&A team, and the size and strategic importance of the acquisition relative to them.
So you might have some direct contact, or information might just flow upwards via their internal channels.
But in all cases, the CEO (together with the Board) will have the final say on whether you go ahead and will sign off on key terms. They will take the final judgement call on how to proceed if the buyer comes across an issue or roadblock in the deal.
The CEO cares most about how the acquisition will fit into their overall corporate strategy, and how they can communicate the deal to their Board and shareholders.
However you interact with them, you want to focus on explaining how buying your company aligns and supports that strategy, and how you can help their business as a whole to thrive.
That positioning can be hard to articulate, but if you get it right its a superpower.
Sponsor
The second most critical person on the buyer's team is the 'Sponsor'.
That's a senior executive from business unit that your company will merge into post deal. See more here.
If the buyer is organised by geography, your sponsor could be the Managing Director of Europe or the VP of EMEA. If they are organised by product line, your sponsor would be the VP of Enterprise. Or if they have a 'matrix' organisation, there might be both.
They are the internal 'champion' of the deal, recommending you to the M&A team and other execs. Within the buyer, they know the market the best, and have authority to pitch acquiring you as the best plan for them to deliver their strategy.
You need them to know your business inside out, and be able to clearly articulate internally why you are a standout acquisition target.
Without a keen sponsor trying to push the deal forward in the early stages, and helping to build the business case, appetite can easily to wane as people get distracted or busy on other projects.
So you want to build a strong relationship and trust with this person, from as early as possible.
We're writing a separate piece on how to find and nurture relationships with potential sponsors. But in the meantime... many of the points in 'How to build relationships with potential buyers' apply to sponsors. Spend as much time as you can with them, build trust levels and get them to meet some of your exec team (those who know about a potential deal).
Head of M&A
Some buyers have a dedicated in-house M&A team (typically Serial Acquirers who do a lot of deals).
The team is headed up by the Head of M&A, also called Head of Corporate Development, supported by a small team of eager analysts. They are often an ex-M&A Advisors who have moved in-house.
This team is firstly responsible for sourcing deals and finding targets, working alongside the relevant Sponsors. So you'll likely have some contact with them early on as they are feeling out potential targets in a market.
Then, they lead on executing the transaction.
That includes doing the modelling on valuation, negotiating the key terms, presenting the deal to the Investment Committee, oversee the due diligence, finalising the contracts and then supporting with post-deal integration. They will be the people you have day-to-day contact with at the buyer.
So they are absolutely critical to getting a good deal done.
This team tends to be very busy, especially if they are running multiple deals within the buyer at once. And they are easily stressed, as they are accountable if something goes wrong during or after the deal (like overpaying, or missing an issue in the DD).
So you really want to make their life as easy as possible. You want to save them time, and make them look good to their stakeholders. If they build a picture of you as difficult or disorganised, that will seep through across all of their analysis.
How can you make their lives easier?
- Get organised. Check out 23 projects to prep your business for sale if you haven't already, for some ideas on what to prepare. That includes things like getting a basic data room in place early, filling it with the key documents, and getting your finances in good order.
- Follow the 24 hour rule. That means responding to their requests as quickly as possible, usually within 24 hours of a request coming in.
- Be transparent. Explain clearly what structures you are open to, and what your non-negotiables are. That will save unnecessary back and forth on structuring. Read this if you want to learn more about potential deal structures.
What if the buyer doesn't have a dedicated M&A team? Then typically the CFO and their team will fill that role.
CFO
As you would expect, the CFO and their team lead on evaluating the financial aspects of the acquisition.
If there's an M&A team in place, they will work alongside that team. As we mentioned above, if there isn't a dedicated M&A team then the CFO's office will own the process.
The CFO responsibility in M&A can be broken into three areas:
- Valuation. They work on the detailed financial models that project the future performance of the combined entities, weighing-up alternative scenarios and valuing potential synergies. This model will determine the price they can afford to pay for you.
- Financial Due Diligence. They will lead on the review of your financial health, identifying any financial or tax risks, and verifying the accuracy of financial data. That will usually involve hiring external experts to run a financial audit. They will then help the M&A team to negotiate the key terms that relate to any issues found in this diligence, or any other financial issues.
- Structuring and Financing. The CFO determines the best way for the buyer to pay for the deal, as part of their capital allocation role. That can be a mix of cash reserves, debt or equity.
The CFO and their team tend to focus more on the numbers than their personal views of the company. But similar advice applies here as to the M&A team – get organised, be helpful and proactive and save them time.
Board of Directors (or Investment Committee)
The last step in every deal is approval by the buyer's Board of Directors. They will sign off (or not!) on the terms of the deal. They have a fiduciary duty to make sure the deal aligns with shareholder interests.
Sometimes, the Board will delegate that responsibility to an Investment Committee. That's a subset of Board members, plus some other executives from the management team.
All the buyer's work builds towards the papers that are submitted to the Board or IC for review. That is a big slab of reports that cover: the strategic rationale for the deal, valuation and justification, due diligence and risks, and the key terms from the contract. They will then debate the deal and approve the go-ahead of signing the contracts.
You won't have any direct input into the Board or the papers submitted, and so won't have any direct contact with these folks either.
But... you might be able to build a relationship with one or two Non-Exec Directors who sit on the Board. That's hard to do, but the easiest time is before a deal is in progress. Check out 'How to build relationships with potential buyers' again for more tips on that.
Due Diligence Teams
As the DD kicks off, you will have direct or indirect access with teams across the buyer's group.
The questions will get allocated out for input and review across HR, IT, Finance, Legal, Ops and so forth. They work alongside the external advisors who are working on the DD. Sometimes senior people from these teams come together to form a Due Diligence Committee.
These people don't tend to have critical input into the buyer's decision making, but you still would prefer them to be positive than not.
The issue here is that this due diligence takes a lot of time, and needs to be done quickly. But it's not their main responsibility, they won't time carved out from their day jobs, and they don't get much kudos for doing the work. It's a chore and a pain the ass, to be blunt.
So, once again, try to make their lives easier. Give prompt and detailed answers to their questions.
Financial buyers
Teams tend to be smaller and more streamlined within financial buyers.
Some of the roles are the same. You will have:
- A Managing Partner or CEO of the fund, performing the same role as the CEO of the corporate
- A CFO reviewing financial information and thinking about how to pay for the deal
- An Investment Committee signing off on the deal
There won't be a sponsor in the same way. But you will need a Partner within the fund who plays a similar role – pushing and championing the deal internally. That Partner will also play a second role of the Head of M&A, leading the negotiations and communications internally supported by analysts and associates.
There will be fewer operational people involved in due diligence, as that tends to be more fully outsourced to advisors.