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How To Create a Strategic Buyers Auction and Acquisition Options Matrix
Posted February 7, 2012
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By Zane Markowitz, Senior Managing Director, McLean, Markowitz & McNaughton Division of The McLean Group, LLC
You can sit by the phone and wait for investment bankers, accountants, lawyers, etc. to call you with the ideal acquisition prospect... or, you can control the process by reversing it. Some "strategic" acquirers think they are doing this by floating their acquisition criteria sheets to the world and then expecting the perfect acquisition to be delivered to them exclusively. And others believe that when their known acquisition target(s) are ready to be acquired, they will be the first to be called.
A really sophisticated and successful acquirer takes a different approach by creating a Relative Acquisition Attractiveness Matrix. If you cannot do this, then you are at risk of missing key and strategic acquisition candidates or of not being able to price an acquisition properly and instead losing it with too low a bid.
Seller auctions orchestrated by good investment banking firms favor the sellers' bargaining positions. By getting there first and creating your own private buyer auction, you effectively take control of the situation.
Here's a story that should drive the point home. Years ago, we decided to buy a waterfowl hunting property on the Eastern Shore of Maryland (Chesapeake Bay). By happenstance, we were good friends of the premier and unquestionably best realtor for waterfowl hunting property in that part of the world. He literally knew all the property owners there. He assured us that when a suitable property came up for sale, he would know about it and we'd get a shot at it. Given our own many years successfully conducting Buy-Side acquisition searches for Fortune 1000 companies and their subsidiaries, we suggested that approach to him. He reiterated his commitment to his own process and we could not convince him try our approach.
So we got maps, called game wardens, talked to Department of Natural Resources (DNR) people, etc. and soon determined where the best duck hunting could be found on the Eastern Shore: a certain area in Dorchester County. Then we called the respective landowners and told them what we were looking for. As we suspected, not one of these properties was actively for sale or listed... but more than half of the property owners were more than willing to listen to us and entertain an offer from us. We bought 350 acres of the best duck hunting property on the Eastern Shore within six months. At the closing, the lawyer, who had grown up with the seller and was a good friend said, "Bill, I didn't know your marsh was for sale?!" Bill responded, "It wasn't." End of story.
Great "not-for-sale" companies get acquired all the time by buyers who get there first and who know how to pique potential interest...
If you do not have the expertise or staff to create and run a proactive, strategically-focused Buy-Side Acquisition Search program, we would like to talk with you. We have more experience in Buy-Side Acquisition Search than most Middle Market Investment Banking firms. We would be happy to put that experience to work for you.
Acquisition Options Matrix
Our Proprietary Acquisition Options Matrix clearly shows the alternatives available in terms of size, fit and interest in being acquired. The Options Matrix helps your Board and acquisition team rationalize the price they are willing to pay (or not) vs. the acquisition options available. If you cannot create this for your company, we can.
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