If your firm is looking to marry, don’t get hung up on the ‘perfect match.’ Keep your eyes open and you might meet that special someone you didn’t expect.
As consultants, we all find ourselves at times torn between delivering what the client wants and what we believe the client needs. Just as clients of A/E firms come in with a vision for their project that has no clear relationship with their budget, firm leaders come to us with their ideal M&A targets and carefully defined parameters.
Probably the most common “push back” on our end comes when our client – buyer or seller – comes to us with an extensive list of requirements for the target firm. I used a (somewhat) facetious example in a recent seminar to illustrate my point: “I’m a buyer who wants an architecture firm with between 35 and 45 employees, based in Charlotte, that specializes in commercial and healthcare design, no work at all in the education sector, revenue per employee in the upper quartile of the industry, a strong second tier of client-facing leaders, no client concentrations greater than 20 percent of revenue over the last five years, and profitable performance.” Then, the kicker: “And it needs to be a good deal for us!”
It’s great – and, in fact, imperative – to have a solid idea of what you are looking for. This becomes a problem when we find a firm in our research that doesn’t check every box, but might otherwise make a “happy marriage” between firms. To continue the marriage metaphor, consider how different your spouse may be than what you would have described as your idea of a “perfect match.” If you won’t go on the blind date, you may miss out on a match made in heaven! Plus, if you have too many requirements for the target firm, I can assure you that it is highly unlikely that the firm will be a good deal financially. Firms are very willing to pay a premium for getting what they believe is exactly what they want. And sometimes that’s too much.
We try to convince our clients to walk the fine line of having a strategy, but also of being open to pursuing unique opportunities as they arise. There are so many firms out there and so many synergies to be had – look for ways to be flexible when you’re presented with something novel that could be a total game-changer for your firm.
Another area that we often push back on is the degree of approval needed from the client before we reach out to firms. Requiring client approval to have an overview or feeler call with a potential firm is a great example of an unnecessary review process that slows down your transaction.
Whether you’re a buyer or a seller, one of the most effective outcomes that a consultant can provide is bringing as many qualified opportunities to the table as possible. That means a lot of phone calls, a lot of emails, and a lot of vague conversations. We provide enough information to assess whether there is a viable fit, then we report back to the client, who ultimately makes the decision on whether to pursue the particular lead. We do not reveal the identity of our client until they have approved the discussion. Restricting the contact list before we even know if there is interest in the conversation, or requiring a review process before what essentially amounts to a “cold call,” does not help our clients close deals.
Your consultant wants to find you the best possible opportunities, and just as you are more than willing to provide creative solutions to help your clients achieve their goals, let your own consultants “wow” you with imaginative thinking in areas within their expertise.
Jamie Claire Kiser is Zweig Group’s director of M&A services. Contact her at firstname.lastname@example.org.