How to squeeze extra value from a corporate finance deal
July 2016 | EXPERT BRIEFING | MERGERS & ACQUISITIONS
When someone has an accident at work, a first aider is called. He or she will have been trained to deal with minor emergencies. After all, being a first aider requires different skills to a day job.
But, when management teams are selling their business, all too often they are expected to shine without training. This can slow, devalue or even jeopardise the transaction. After all, they may be professionals at their day job, but they are probably amateurs at selling an investment.
Below are five techniques that can transform a pitch from amateur to professional.
Craft a powerful investment narrative that can be used flexibly
The most frequent problem with management presentations is complexity. The more complex the business, the more important it becomes to unearth the simple investment narrative at its core.
A clear investment narrative helps prospective buyers make sense of what they hear in a memorable and powerful way. Everything presented to a buyer should have its roots firmly hooked into this narrative.
Then, depending on the needs and interests of each buyer, the management team can shift the emphasis of their narrative, like pulling out different chapters of the same book.
Build rapport quickly
You want prospective investors to be excited about this opportunity from the very first meeting. Psychologists have shown that buyers can make unconscious decisions within seconds. To achieve the right reaction, the team needs to sparkle and create an immediate rapport.
Not preparing, showing nerves or ignoring the importance of building rapport can lead to a stilted start. That risks immediately putting the management team on the back-foot and giving the buyer a sense of unease.
A buyer will judge the team based on what they see and hear – i.e., how the management team communicates, as well as what they say. According to research by Harvard Business School’s Amy Cuddy, warmth is just as important as competence.
Managers can influence prospective buyers’ perceptions by smiling more, maintaining eye contact for longer and asking more questions. These are simple changes. But – unless management teams are aware of the impact they can have – they often get missed.
Prepare for a two-way conversation
Whilst the traditional understanding of buyer pitches is as a formal, one-way presentation with questions at the end, it’s much more effective and engaging to interact throughout.
In fact, two-way communication is essential for the management team to connect fully with the buyer. It ensures that what has been presented is understood, that what is said is relevant to the buyer’s interests and that any outstanding queries are addressed straight away.
Present as a cohesive team
Buyers want to see a healthy, functioning management team. Issues between team members are easy to spot from their body language and facial expressions.
For example, if individuals are merely waiting for their chance to speak, or if they are looking bored or uncertain, or if they interrupt or contradict each other, the buyer will begin to question what they are hearing.
Most people underestimate how important micro expressions can be in conveying true feelings. And sometimes it’s only after intensive preparation that that a team will look relaxed, purposeful and natural.
Role play tough questions
Are the management team capable of handling tough questions confidently and calmly, even when put on the spot?
Flustered, rambling or insufficient responses raise warning flags. When you analyse the company’s performance and plans with an investor’s eye, you can identify potential questions that might be asked and rehearse the team’s responses.
Honest, direct answers – including lessons learned from things that haven’t gone as planned – will build the credibility of the management team and encourage trust.
It is often underestimated how much additional value can be added to a transaction by properly preparing a management team. With expert help, a team can look and sound more confident, consistent and credible.
The involvement of coaches and professional communication advisors is now standard for public companies. But for private company transactions, it is less common to see the professionals called in, even though it may be the easiest way to add extra value to a deal.
Benjamin Ball is the director of Benjamin Ball Associates. He can be contacted on +44 (0)20 7193 0130 or by email: firstname.lastname@example.org.
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Benjamin Ball Associates