Some of the leaders I spoke with had a single buyer in mind, or were approached by one or two companies. Christian described a different process (sometimes literally called “a process,” as in “I’m going through a process,”) one where T3 explored relationships with a variety of companies prior to selecting a potential buyer; he explained that he met with 16 different companies!
This process is almost always orchestrated by a banker (or M&A advisor). They have a network of potential buyers, they understand the temperature of the market, and they know exactly how to run the process. The process is a bit of a roadshow, and sometimes it’s even referred to that way. I talked previously about the process of generating the preliminary financial model, sending out the teaser, and then sharing the Confidential Information Memorandum (or CIM). This is the result of that process: meeting with candidate buyers.
This is a part of the process where we as consultants excel. It’s a storytelling activity, one where you paint a picture of a compelling, persuasive, and exciting future. It’s just like a business development activity, where you hope to learn and sell simultaneously. The fundamentals of business development apply, like speaking with confidence and clarity, quickly building rapport, learning about what your audience wants to see before diving in, and checking in to make sure people are tracking. No need to go into detail on those here—you’re probably already an expert! But there are some things you’ll encounter that are slightly different than your typical business development or client-engagement call.
A big part of these meetings are focused on the fundamentals of your business: your financial health and forecast. You’ll be asked to describe the clients you have and industries they are in, their relative proportion to your overall revenue, your history with them, and your projection of work you’ll bring in from them in the future.
Many smaller consultancies have established themselves with the support of one or two anchor clients—big companies that have trusted them with large, ongoing and dependable work. You’ll hear later from Max Burton, who developed a very strong relationship with Carnival Cruise Company, and Crystal Rutland, who ultimately sold her company to one of her big clients, and we’ve already heard from Maria, who mentioned that Facebook was one of her existing clients. But while these large clients help a new company get established, they present worry to a buyer; too much consolidation around a single client rests an awful lot of risk on one set of shoulders. Anticipate questions about this form of consolidation, and if you have it, how you intend to diffuse it.
Additionally, you’ll be asked about the projections you’ve developed in your financial models that were summarized in your CIM and that have been socialized by your banker. This is where you’ll field questions about your assumptions. If you indicated 50% year-over-year growth for the next three years, what are you basing that on? A buyer’s looking for plausibility.
You’ll also get questions about how you generate business. This is an indicator of how quickly you can scale your revenue. Do you have a sales machine in place, or are you personally selling all the work? Are prospects coming to you, or are you out there hustling? What investment will the company need to put into your business to help you achieve your growth plans?
A fundamental part of a creative services company is, clearly, the creativity: what gets made, how it gets made, and why it’s valuable. We never pitch work or engage with a client without something to show and to visually respond to. We were surprised, then, to find out that showing a case study or diving into a work sample wasn’t a typical part of the initial roadshow meeting. It wasn’t discouraged, but it also wasn’t part of what’s normal. Instead, it seems much more typical to talk about the work and working process, but spend more time focusing on clients, the financials, sales pipeline development, and the mechanics of profitability.
That makes sense, given that these meetings are often orchestrated by bankers or private equity companies; a financial focus is literally their job and what they care about the most.
But visual assets, artifacts and stories, are our industries’ primary means of speaking, and without them, we’re not showing as best as we can. If these meetings aren’t being organized around a short case study of what you do, how you do it, and the value you provide, push back and make sure you are driving a part of the agenda.
Imagine Christian’s experience: exploring a relationship with 16 different companies. Being conservative, that’s 16 one-hour prep sessions, 16 one-hour meetings, 16 one-hour debriefs, 5–10 hours of scheduling, 30 days of travel, and a flurry of emails: a floor of 100 hours, and likely a lot more. And that’s just the first round of dating! After all of those meetings, you can expect a subset to move to a next set of conversations, and those may be much longer and in more depth. All-in-all, if you’re taking the company on a roadshow, mentally prepare for up to a month of solid meetings, and for hearing yourself talk about and hype your company over, and over, and over.
While you’re doing this, you won’t be running your business—at least not as effectively as you’re used to. Get a plan in place for who is going to handle all of the things you normally do. You’ll probably have to tell these people why you’ll need extra help, and so this is a place where having a partner or close confidant within the company becomes helpful.