The Four Questions Corum Asks

The Corum Group functions as a group of M&A advisors that work collaboratively on every single deal.  As a dealmaker, I speak with a number of companies, not all of them are Corum clients.  A good chunk of my time is spent sitting down with them and discussing the M&A process.  Corum has an extremely detailed process that we have been constantly refining over the past 32 years.  Our approach is one of team-selling.  Each client has a team of two dealmakers, one member of our Client Services team, one of our professional writers, and our entire research team (which includes our financial team).  Each client is given significant care which isn’t a small investment from Corum’s perspective.

 

However, the decision to go to market isn’t just important for Corum.  It is incredibly important for our clients.  We constantly say how the decision to sell your company is the most important you will make.  The dealmakers that are working at Corum are all former CEOs who have sold their own software, including myself.  I’ve participated in two different kinds of acquisitions; one by a Private Equity firm, and one by a Strategic.  My experience, as well as the experience of my coworkers, means that we understand where our clients are going and what might pop up during the process.  This is a reason why many clients feel comfortable going to market with Corum behind them.

 

However, before a company becomes a client, we have to talk about the ‘fit’ of the prospective company before we take them on at Corum.  It isn’t just about a prospective client deciding to use Corum; Corum also has to decide if the client is on the same page.  Clients that are more aligned with us about expectations and the process are going to go more smoothly through the process.

 

You may be wondering about the questions that we ask to see if a potential client is on the same page.  The answers to these questions can really let Corum know if a prospective client is going to be a good client and also what approach the Corum team needs to take with this new client.  There are only four, but they are each incredibly important:

 

  1. Have you been through the process before?
  2. Why do you think a buyer will buy you?
  3. What do you expect an advisor to provide?
  4. What do you want to get out of the process?

 

1. Have You Been Through The Process Before?

If they haven’t been through the process before, then we know that we need to slow down a little bit and make sure that they understand all the pieces of the process.  If they already know the process, then we’re better able to jump right in without doing a lot of explanation for them.

 

This isn’t necessarily a reason why we would turn down someone.  If they don’t understand, then we’ll walk them through it.  We do this at our Merge Briefing and the Selling Up, Selling Out events for all sorts of companies, so we’re well prepared to continue the conversation and discussion about M&A with any prospective companies.

 

2. Why Do You Think A Buyer Will Buy You?

This question helps us understand if the seller is really thinking about the process that they are going to be going through.  When you start to look at selling your company, you need to start shifting your mindset away from solely selling your products.  The company is a different beast.  In fact, this shift in frame of mind is so important that Allan Wilson wrote a blog post about this as well.

 

But once they’ve gotten into the frame of mind of selling their company instead of their product, they’ll be able to narrow in on what their actual core competency is and what their unique selling proposition can be.

 

This will be a question that Corum will also look into.  Companies that are likely going to sell are going to be differentiated in their respective market.  Without a differentiation, then they won’t be able to get a good list of prospective buyers as they might too many companies or not have a unique fit for specific buyers.  The Corum research team makes a buyers list based on what Corum seems as unique in a client.  This isn’t just about the products that you offer, but the vertical that you’re in, the company culture and more information that comes through during several meetings and a worksheet.

 

The best part of knowing why a prospective client might think why a buyer might be interested them is that it might allow us to see how our prospective client aligns themselves in their market and if they also are aligned with one of Corum’s Top 10 Disruptive Trends.  Companies in these trends will have better valuations and will be able to turn the selling process into something that looks a little bit like an auction.  This drives up the price of the company and attracts the interest of very different buyers.

 

3. What Do You Expect An Advisor To Provide?

This question is incredibly important for Corum because it means that we will be able to make sure that our client is on the same page as us.  The Corum Group provides many tools to our clients: our research team and dealmakers assess and research buyers all over the world including who you need to contact; a valuations expert will look at your numbers and help provide the best valuation that really considers the kind of company that you; a professional writer works on the Executive Summary; dealmakers help screen potential interested companies; multiple members of our team provide advice throughout the process.

 

However, we don’t provide tax, legal or accounting advice.  In the M&A process, you need to have the best team on hand, but Corum will advise that you seek advice from other parties in areas that we are not focused on, especially if it is something that may stop the process from moving forward.

 

4. What Do You Want To Get Out Of The Process?

When you start the process with Corum, we will work to get the best possible outcome.  However, an Optimal Outcome might not look like exactly what you expect.  This is why the alignment of our potential client is incredibly important to us.  It isn’t just about making sure we know what they want, although knowing if the CEO wants to retire or if they want to continue to work with the company is also incredibly important.  It’s about making sure that they know what is realistic and reasonable.

 

And beyond a reasonable price for the company, we want to make sure that their ideas and hopes for the future of that company are on track.  This can mean digging deeper into parts of the process such as preparing for a full exit where members of management retire or making sure that the CEO and other management are actually all still on board after the acquisition.

 

We aren’t just looking to make sure that the shorter term goals of a successful sale are met but that the future of the company is also set.  Going through deals is difficult and if you don’t think about the future, you may set yourself up for some hard times with the people closest to you.  Rob Griggs talked about the lessons that he learned from selling companies in another blog post and I have to say that these are important for a potential client to keep in mind as they look to their own future.

 

Conclusion

The M&A process is difficult and the outcomes can be uncertain.  Companies need the best people on their side to get the best outcome.  But it’s also important that a group like Corum has confidence that there is a good chance of the Optimal Outcome coming together for the companies that we represent.  When I sit down and talk to potential clients or meet with companies for the first time, I always make sure to ask each of these questions to make sure that we’re on the same page and to ensure that they are ready to go out into the market and try for that Optimal Outcome. So ask yourself these questions too, if you’re starting to think that it’s time for you to prepare for the exit.

Posted by , Vice President on 5 June 2018
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