Since law school, I have been representing bulge-bracket private equity funds making splashy acquisitions. These acquisitions are intense, and aggressive, and often covered by major newspapers. I have worked with and against some of the best M&A lawyers in the world, representing seasoned and sophisticated fund MDs. I am now dedicating myself to representing searchers and SMB buyers (reasons I'll share in another post).
Here are things I learned from the big deals that you can apply to your deals:
1) Lead with values and create a feeling of partnership with seller - this may be obvious and many SMB buyers do this, but my most common comment on a Searcher's LOI is, "add a reason that the seller will be proud knowing he sold to you; find values that align with the seller." I represented a PE buyer in a majority acquisition of a householder lifestyle/fitness brand. The brand decided to take my client's lower offer (millions lower) simply because the PE buyer fit into their gym-bro culture.
2) Move quickly and aggressively, create a sense of urgency, and sprint until the deal is signed - the faster you move the more likely you are to win a deal. It is an easy way to show your seriousness. Impress this on your lawyer by responding to him/her quickly and giving them clear deadlines. This is especially true I represented Platinum Equity acquiring McGraw-Hill for $4.4 billion. It was one of the fastest deals we did, we barely slept for a week, but Platinum eventually won the deal. If you find your team moving too slowly, set up standing, daily check-in calls.
3) Don't be afraid to increase your purchase price (within reason) - I have seen clients lose great deals over immaterial amounts, but big PE guys were not afraid to increase purchase price above where they were comfortable. In the long run, if it is a good business it will be good whether your IRR is projected to move up or down by a couple of percentage points. You will lose sleep over losing a good deal, but you will never lose sleep feeling that you over-payed for a business you believe in.
4) Surround yourself with the right people, even if it costs more - your local guy may be your friend, but you want teammates who have seen hundreds of these deals and can draw on past successes, failures, and experiences to save you time and money. The professional PE guys know that going cheap is expensive.
5) Don't get caught in the weeds on diligence and don't let your lawyer - I've seen lawyers kill good deals over diligence. I've seen clients lose sight of the deal because they want to investigate each diligence issue. The big PE guys know that no business is perfect and that is an opportunity for the buyer. Protect yourself sufficiently through indemnifications, escrows, and setoffs, and don't let immaterial diligence issues kill a good deal. I will dedicate another post to how to talk about diligence with your lawyer, but the most important thing is to set a clear scope for your lawyer and ensure they are only looking for high-level red flags (especially if billing by the hour).
There are many more lessons I have learned in the trenches on big deals. Please let me know if you are interested and I'll keep it coming.
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