Ownership Mindset and M&A

How does the business owner view their business?

And what does this have to do with M&A?

A lot.

Based on the companies we've worked with, I've identified seven types of business owners.

• Each has different values and goals.
• Some people know what drives their decisions, several don't (consciously)
• And not everyone falls neatly into one of these categories

Regardless, the ownership mindset determines how they operate their business, and how they view M&A.

Here goes.

Seven types of business owners:

1) Lifestyle Business Owners:

• Run businesses primarily to sustain a particular lifestyle rather than for aggressive growth or large profits.
• Business operations sometimes align with personal passions or interests (e.g. someone who loves baking and running a bakery store).
• Tend to prioritize work-life balance. The business gives them the freedom to engage in personal hobbies, travel, or spend time with family.
• Resistant to aggressive expansion or scaling, as that could disrupt the very lifestyle the business was meant to support.
• M&A might not be on the forefront of their minds, but they might consider it if it allows them to maintain or enhance their desired lifestyle.

2) Legacy Builders:

• The business is an extension of their personal brand or legacy.
• Focus on long-term sustainability, community involvement, and perhaps even generational continuity.
• Often hesitant about M&A unless the acquiring entity aligns with their values and vision for the company.
• The business's reputation and how it impacts the broader community or industry is of paramount importance.

3) Serial Entrepreneurs:

• Always on the lookout for the next business opportunity or venture.
• Likely to build a business, sell it, and then move on to the next one.
• Tend to have a keen sense of market dynamics and are quick to adapt to changing market needs.
• Understand the M&A process well, given their experience with buying and selling businesses.

4) Reluctant Owners:

• Inherited the business or took it over due to unforeseen circumstances.
• Might not have the passion or skills to run the business effectively but feels a responsibility to continue.
• Could be open to M&A opportunities as a way to ensure the business's survival or to pass it on to a more capable entity.

5) Financially Driven Owners:

• Primary motivation is financial returns.
• Highly responsive to market trends and shifts.
• May rapidly pivot business strategies to tap into lucrative markets.
• M&A is viewed purely from a financial return perspective. Will be highly interested if the deal promises substantial monetary gains.

6) Innovators:

• Always looking for ways to disrupt or innovate within their industry.
• Business might be in a constant state of flux due to their focus on R&D, new product development, or adopting new technologies.
• M&A is appealing if it brings in new technologies, intellectual property, or capabilities that can further their innovative endeavors.

7) Social Entrepreneurs:

• Business is designed not just for profit, but to address social or environmental challenges.
• Often blend non-profit and for-profit approaches to create sustainable social change.
• M&A interest might be driven by opportunities to amplify social impact, access to broader networks, or resources to further their mission.

How does this impact M&A strategy and process?

As an acquirer:

Knowing what makes the CEO tick is vital to framing the offer and the value proposition of an acquisition the right way.

If you're considering making an M&A offer to an acquisition target,

1. How do you identify the business owner's mindset?
2. How do you structure the offer accordingly?
3. How do you negotiate?

As a business owner:

Being self-aware of and being honest about what motivates you is vital to running the business "clean", and being able to respond to market conditions - and to fielding M&A interest.

1. Do you know what makes you tick?
2. What can you do to manage your business in the steady-state, while being ready for an exit at the right time?
3. What tradeoffs are you willing to make to do a deal?
4. How do you negotiate?

#mergersandacquisitions