M&A Imagineer: The “Swarm” Strategy
If you have a decently sized (private) company, decided to “exit”, been seduced partly by your own ego but also by an artificially high offer price, and consequently entered into informal/formal discussions with an institutional investor but have become increasingly frustrated because they are dragging out the deal, seem to be constantly chipping away at the original “offer” and/or skewing the terms more and more in their own favour – “WTF”?
All you want to do is to exit ASAP, but there appears no end in sight to the constant negotiations, due diligence…
So how could you potentially deal with this (as an imagination fair only): develop your own version of a “Swarm” Strategy (almost akin to a reverse “Stalking Horse” strategy)?? With a conventional "Stalking Horse” the potential business acquirer sets a minimum or floor price for the acquisition (maybe for a fee)?? In contrast, with the “Swarm” Strategy you actively seek mostly “trade buyers” (but also some potentially other interested acquirers) for your business via your existing commercial network of networks – in complementary sectors.? Discretely ask if any contacts would entertain a strategic acquisition of your firm?? If so, solicit that each “new” potential buyer aim to make a formal offer close to what you are realistically seeking but higher than the “chipped-down” price that the institutional investor has now negotiated down to?
If the negotiations with that institutional investor completely break-down or the terms become (for you) so grossly “unfair” you then choose, with your expert “deal team’s” help, from your “Swarm” offers what is the best price and terms available, and acceptable to you now?
It is at your complete discretion as to whether you decide to leverage these in re-entering negotiations with the institutional investor or not (but what is to stop them “coming back to zero” – with an even worse offer, after somehow “chasing away” their competitors should they subsequently find out who they are)?
Your professional advisors (especially legal team) will be crucial to ensure that this matter is dealt with very carefully so that there is little or no “legal” comeback from the institutional investor that may be inclined to consider a “law fare” route to intimidate you afterwards – not all “Pinkies” are “Perkies” (honourable)??
Old adage: “If it sounds too good to be true, it probably is?”? When somebody makes you a silly offer for your business, put your ego to one side; do not spend any imaginary money, instead think “Why”?? The highest “offer” (regardless of who makes it) may not necessarily be your “best” offer nor the investor making that offer your “best” friend?
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Kip
The EBO Guy??????
…Acquiring businesses for employees