(Your chance to eavesdrop on a conversation between
Patricia Fripp and her friend, mergers and acquisitions
specialist Mike Sipe.)
My friend Michael Sipe is a brilliant mergers and acquisitions
specialist. Here's a great business tip he gave me that you might adapt to
your own business.
"We were involved in an acquisition search for a client I'll call
'Jane.' I became aware that an internationally famous giftware store was for
sale through a general business broker. My client was very interested, but
the broker had already received three full-price offers.
"I could have just stopped there, but I had a good relationship with
this broker and persuaded him that my buyer might be a perfect match. I knew
a little about the seller and suspected he had not hit it off with any of the
other potential buyers who just wanted to pay their money and take over. I
had a hunch the seller might be interested in more than money. He had
personally built up the business over the years, regarded it like a child and
his business was an integral part of his identity. My guess was that, while
he wanted to sell it and retire, he secretly hoped to continue to be an
influence in the business and to be connected after the sale. The other
bidders apparently had no interest in his 'interference,' once they owned it.
"So I set up an interview between Jane and the seller. Jane is very
intelligent and accomplished in her own right. She is a successful attorney
and had also gained national recognition for her own varied business
successes.
"I coached Jane in how to act, and she did a magnificent job. During the
meeting, rather than extolling her own virtues, she took notes and treated
the seller with great respect. She listened rather than talked and brought
out his fatherly feelings. Though she planned to introduce her own skills,
modern technology and fresh motivation to the company, she indicated she
would value the seller's continued input as she learned his specific business.
"Most business deals, contrary to popular wisdom, are about more than
money. As a buyer, you are actually a 'seller,' first of all selling the
seller on why the business should be sold to you. Then you may need to sell
the seller on the terms. You need to sell the employees on staying, the
customers on continuing to buy, and the vendors on continuing to supply on
the same terms. You also have to sell the landlord on renewing the lease,
which can be the most difficult part of retail negotiations.
"So I coach buyers up front about how to position themselves properly
and create an environment where the seller wants to sell the business to
them.
"My goal is that after the first meeting between buyer and seller is to
have both parties saying, 'I really want to pursue a deal with that person.'
In Jane's case, I considered the background of the seller and counseled her
on how to stand out from the other potential buyers.
"At our first meeting, I told the seller, 'My wife and I are longtime customers of yours. I look at businesses all the time, but I can't figure it out -- what is the secret of your business? What is your magic?' Based on how he responded, I doubt that anyone had ever asked him that before. He was delighted to answer as Jane took notes, attentive to everything this master merchandiser had to say about running a retail operation.
"He shared two of the greatest insights into retailing that I have ever
heard. 'Mike,' he said, 'the first secret is that there must always be an
'element of discovery' when people shop. Our store layout is designed and the
merchandise positioned so that people have to look for things. As they do,
they `discover' unexpected treasures, and race with them to the cash
register. So what looks like disorganization is actually carefully planned.
There is method to my madness.'
"'The second secret,' the seller continued, 'is to never forget the
potato peelers. Although I scour the world for unusual and extraordinary gift
items, things that you won't find anywhere else, and people come to our store
solely because of these items, I never forget to stock the fundamentals. Not
because people come here to buy them, but because while they are there, they
notice a potato peeler or a spatula or cheese grater that they were planning
to buy at a discount store. Because of our special environment, and the
convenience of being able to buy the item now, they purchase at full margin.
Never forget the potato peelers.'
"We orchestrated a series of meetings between Jane and the seller as he
instructed her in what and how to buy. She was learning everything she could
and building a relationship.
"When Jane was ready, we structured an offer that was significantly less
than the offers already on the table and structured much more favorably to
the buyer. The offer included a consulting agreement with the seller. The
seller accepted! Jane had established a relationship with him and he was
confident she would do great and take care of his 'baby.'
"Jane bought the company and then made her own changes. She designed a
twenty-first century store that incorporated what she had learned from the
seller. When the seller came back, month after month, as part of his
consulting agreement, he was astonished and pleased by the high
customer-service level of the sales staff, by the exciting new atmosphere of
the store, and by the growth of the business.
"Part of the secret to matching a buyer and seller is understanding that
a sale is not just about the money. It is also about the chemistry between
buyer and seller.
"To create this match, research the participants and coach your clients
so that the rapport gets established. Brokering should not be an adversarial
situation. It's about matchmaking, moving the right buyer and the right
seller together toward a mutually satisfying closure. It's creating an
environment where each gets what they want.
(1011 words)
