Truth be told, our biggest competition isn’t other M&A firms in our market area; its buyers that contact agency owners directly. From a marketing standpoint, I’m not afraid of this fact because when an owner only negotiates with one buyer then the big question is always “Is this the best offer out there?”. You will never know that answer if you only deal with one or two buyers.
Buyers that contact agency owners directly are on a fishing expedition. Their strategy is to engage many owners at one time with the hope that at one opportunity will pan out (likely less than 5%). They have options so they are far less committed to any given deal than an owner can become for reasons noted below. At the end of the day, if the deal does not fit neatly into a box, then they will walk away.
Here is why some buyers like to go directly to the owner.
1) No or little competition. Many buyers that contact agency owners directly will not win in an aggressive bidding against other buyers. I know this from experience. Either they are not the most qualified buyers, or it’s not their MO to be the highest bidder (see some examples in my prior article). No buyer can possibly be the most strategic one on every deal when they are out soliciting dozens or hundreds of agency owners, which some are on an annual basis.
2) They want to be in control of the process. The buyer usually captures the owner’s attention with a compelling story about them or their company and maybe other acquisitions that they have completed (the bait). The underlying intent is to create credibility so that they can ‘educate’ you on the market value and sale process, which puts them in control of the conversation.
3) Time is on their side. Once they have your attention, then they have you hooked into going through an often lengthy back and forth process of discovery before presenting a concrete offer. By the end of the discovery process, the owner has invested significant time and perhaps has emotionally committed to the idea of selling. The buyer has also had more opportunity to build rapport. All of this creates leverage for the buyer because you are inevitably faced with the question of “Do I take this offer or go through this exhaustive process again with someone else?”. (I call this deal fatigue)
As an agency owner, you will likely only ever sell a business one or two times in your life. The only way that you’ll ever know that you received the best offer for your business is to prepare it for market and simultaneously solicit offers from multiple prospects. Avoid falling for someone else’s bait and bait your own hook. Like in fishing, expertise and having the right tools has a drastic impact on the quality of the outcome so hire a professional to handle the process for you. We’re exceptionally good at this game. Read my article “Four Reasons to Hire an M&A Advisor” for more information.