Issue link: http://read.dmtmag.com/i/414216
32 Oil Prophets BUSINESS STRATEGIES Even marketers with a track record of acquisitions are starting to hit some snags they didn't anticipate. What's happening? What has changed? If buyers want to buy, and sellers want to sell, what is keeping happy marriages from taking place? Over the past 12-18 months, I've witnessed the proliferation of six common deal-killers undermining buyer/seller relationships. Just understanding these new dynamics in the marketplace will allow you to rethink your strategy and progress more smoothly on your next transaction, but the suggested action for each will turbo-charge your success. Deal Killer #1 - Window Shoppers. Buyers who say they want to buy, may actually believe they want to buy, but have not made any offers are eroding trust in the marketplace. We've even witnessed marketers whose true desire is to sell and have no intentions of buying, pose as buyers. They just wanted to see what is happening to know if the timing is right for them to pull the trigger. While I understand their desire, it's not a forthright way to gain intelligence. Why does it matter? It matters because as this pattern proliferates, buyer trust is eroded. A seller is putting his heart, soul and generations of family work on the line. Because of window-shoppers, even a trust-worthy buyer must now prove their sincerity. Suggested Buyer action – Only ask for details on transactions you REALLY WOULD BUY! Then express your sincerity to the seller on why their transaction would be a good fit, including being upfront and honest on any possible hurdles that could keep you from proceeding. Suggested Seller action – Ask how many acquisitions the buyer has actually closed on, why your company interests them, how it fits into their strategy, their timing on closing, etc. (At Meridian, when we share offers with a buyer and have two or three non-actions in a row, or feel their excuse for not making an offer is bogus, we stop calling them for deals.) Deal Killer #2 –Guerilla Competitor. In an industry where you go toe to toe on margins and service, it's a very emotionally difficult leap to sell to a close big competitor. In fact it's so difficult, that many marketers exclude direct competitors from their buyer pool. Why? Mainly it's fear the competitor could back out of the deal last minute after getting complete margin and customer information in hand, later squashing the seller in the marketplace like a bug. Suggested buyer action – When you know in your heart of hearts it's a transaction that makes sense, offer sizable, non-refundable escrow money up front to show your sincerity. Suggested seller action – Don't let the Hatfield/McCoy mentality keep you from a successful transaction as long as there is a reasonable culture fit. Insist on an escrow, honestly explaining your concerns. Deal Killer #3 – Unrealistic Seller Price Expectations. Deals have to make sense economically for sellers and cash flow is what finances acquisitions. Sellers, on the other hand, see years of hard work, a loyal customer base built over those years, a lot of cash sunk into real estate, trucks, plants, etc. If the business profit plus depreciation has waned over the years, the business simply won't produce the cash needed to pay for all those assets. Sad but true. Suggested buyer action – If a seller names a price, tell them what you would need that business to produce annually to support that price and then ask them how they see that happening. Enlist their help so if there is something you aren't seeing, you can possibly raise your price. If Betsi Bixby Meridian Associates What's Killing Petro Buy/Sell Deals