Preparing For Scrutiny

So far, in this series, I’ve largely focused on the preliminary preparations you and your company can make before the formal process begins.

I want to re-emphasize here that the most important preliminary step you can take is choosing the right M&A Advisors. They are a key factor in the transaction’s quality and the relative ease with which the entire process moves forward.

When you engage a firm like Stillwater Capital and the first preparatory stage of the acquisition process formally begins, you should feel like you’re in good hands. You should be working with people who listen to you and your needs and are curious about how your business is run. I’ve mostly discussed the preparatory stage regarding the work your advisory team is doing to prepare for the search process, narrow down the field, and engage in a well-informed market outreach push.

The other dimension of this stage is equally important: your M&A Advisors will also focus their laser-like attention on You. You should be prepared for the scrutiny.

As I reference in our series of posts on The Steps to Selling a Business , the investigation process for the seller in an acquisition deal is an incredibly intensive, exhaustive (almost invasive) exercise. Every inch of the seller’s business is scrutinized, summarized, and prepared for disclosure to interested buyers. As a buyer, your process still needs to be thorough and conducted with integrity, with an accurate representation of the state of your business as a result, but it will be far less stringent a process.

The criteria that a seller is looking for in you as a buyer is much simpler than your criteria for them, but they will still want to know who you are before they deal with you.

So, your team of advisors puts you under the microscope so that they can tell your story. There are two main areas up for analysis:


While a seller needs to prepare a very granular inventory of their finances, there is just one major criterion your financial picture needs to satisfy as the buyer:

Do you have enough money to buy this business?

At Stillwater, one of the first questions you’ll be asked by your advisors in the preparatory stage of the process is, “If you had to write an equity cheque, cashable today, to buy a business, how big a cheque could you write?”

Your answer gives your team a baseline of understanding and an advanced idea of what the financing side of the acquisition will involve.

In general, the financial discovery process that your M&A Advisors conduct with you is going to involve the following:

  • A full financial inventory: assets and risks, cash-flow requirements, and everything we need to know to complete your deal.
  • Your price range: What are you willing to spend, and where is it coming from?
  • Serious conversations with every stakeholder. We talk to your banks, your financing sources, and your shareholders. We need to know how much they are prepared to back the acquisition and what stumbling points they might warn us about … but above all, we’re looking for consensus from everyone involved.

The second area of scrutiny you’ll face in the initial discovery process is all about:


Midway through the process, when your M&A Advisors begin to engage specific companies in actual conversation, they need to be able to tell your story. That means they need to know everything about your history, day-to-day operations, strategies, and structures. Again, a seller faces a much more glaring inspection here, but you should be prepared.

The story your advisors tell a prospective seller needs to tell them two things: first, that you can afford the deal you’re offering and not wasting everyone’s time (it happens more often than you might think), and second, that you are a professional and well-organized operation that communicates transparently and honestly.

If you engage Stillwater Capital to handle your acquisition process, you’ll find we take great care to learn your story but even greater care in strategizing how to tell it.

That’s why I deliberately hire people who demonstrate superior adaptability, quick thinking, and smart decision-making at the moment. My interview process is designed to reveal it in prospective hires. It’s a key skill set to play during our first conversations with prospective sellers, and I make sure that every team member can do it well.

Before approaching any potential acquisition, we do our homework and develop a good sense of what makes the company tick. With that sort of knowledge in hand, highly skilled advisors who are adaptable in steering the conversation can tell your business story in a way that’s tailor-made to appeal to the seller’s particular values and motivations.

We must be perfectly consistent in our messaging and information about your company with every prospect we meet and in every conversation we have with them from beginning to end.

No matter how much a skilled advisor needs to adapt her delivery of your story to suit the situation, it has to be grounded in a bedrock narrative that never changes. We have a solution for that.

The result of the scrutiny you’ll face during the preparatory stage of the acquisition process is a 3-4 page master summary document that tells the story of your business. The facts and figures, the agreed-upon strengths of the overall narrative—everything is all laid out concisely. This master document is for internal use only. No client will ever see it; it will never be printed in a promotional packet—but it is the official story that all communications must agree with.

It becomes a guideline for the storytellers on your team. It frees them to customize how and what they say about you perfectly to suit every unique prospective seller and never tell it the same way twice, in full confidence that what they are saying can hold up to scrutiny. It’s already been scrutinized.

So, that’s what you should prepare for as the preparatory phase of the acquisition process begins in earnest: scrutiny—not just of your financial health, but your whole identity as a business as well—and a team of experts learning everything they can about you, and using what they know to present you to the market as a buyer worth taking seriously.

We can do that for you at Stillwater Capital. Contact us here to get started.

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Written by: Douglas Nix