Insights

Narrowing the Field pt.1

Steps to Selling your Business Part 22.

The Market Outreach Phase is an energizing time in the sale process. Lots of time has been spent researching and reaching out to a robust list of prospects. As I’ve discussed earlier, this is no small feat, so what needs to be done next might seem counterintuitive. 

Here’s what we do; we cross people off the list, as many as we can.

This is by design: we have stocked a pool with high-quality candidates, and we are confident that a great final sale is waiting for you. However, it is time to narrow our search – quickly. At Stillwater, we measure the progress of your sale process by the likelihood of closing the deal, so we need to separate the serious buyers from the half-hearted, “maybe” buyers, and focus our attention where it will do you the most good.

Depending on the size of our initial outreach and the response rate we achieved, we may still have a roster of dozens of strong candidates. That’s far too many. We need to pare that list down until we are working with no more than ten contenders.

At Stillwater, we use a simple two-step process to get this done. We’ll explore the first step today and cover the second in our next post.

The first step we take to tailor our list is straightforward, but has a significant impact. We ask every interested party for a written Expression Of Interest (EOI).

If a buyer wants to proceed with the sale process, they are required to send us a one to two-page document to indicate their interest, along with their initial thoughts about our client’s value. It is non-binding and requires little effort, but anyone who wishes to move forward must produce it. The effect on the list of buyers is rapid; names will be crossed off in short order.

Two types of buyers leave the pool: those who were never really serious in the first place, and those who were genuinely interested but who have realized that the fit or the timing isn’t right.

The list will have shrunk substantially at this point. It is now time for your M&A Advisors to review who remains. The questions to ask yourself at this point include:

  • Who is already on the same page as us?
  • Which of your candidates appear to see the same value in your business that you do? 
  • Who has already begun to consider and dream about the possibilities? 

Answering those questions will identify potential best matches.

Among the buyers who delivered an EOI, there are usually two groups of outliers at either end of the spectrum. Each group is of interest to us for different reasons.

First are the parties we want to keep above all others. These are the buyers who clearly understand what your business is about, who are moving forward with intention, and are actively engaging with us in the process. The probability that we’ll find your buyer in this group is high. These outliers stay.

The group of outliers at the other extreme are the value buyers (aka the bargain hunters). They will not make it to the next step. Once we identify them, we cut them. 

There are two types of bargain hunters we encounter, neither is worth pursuing.

The first is well-intentioned, perhaps genuinely interested, but we know what we expect valuations to be, and we know they won’t be able to keep up. It’s not a good use of our time or theirs to continue.

The second type of bargain hunters are the bonafide bottom feeders, the predatory shoppers. If any have slipped onto your list, they are dispatched with haste.

Stillwater Capital is unapologetically not the firm you come to for a bargain.

That would run counter to the commitment we make to our clients.

Our job is to represent them in a way that guarantees the best outcome for them.

That means finding the people who will see the value in what our clients have built and offer the price they deserve for it. Everyone else is off the list.

There are a few more cuts still to come! Next week we’ll discuss the 2nd step in the pruning process—the management meeting.


If you are planning to divest your business or have questions for one of our Advisors, please contact our team today.

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Written by: Douglas Nix