In this episode, Kison interviews International Strategy and Business Optimization Specialist Abhik Jain.
Together they talk through the differences between M&A, PE and investment banking, proprietary and auction deals, and Jain’s personal advice on handling negotiations and transactions both from the sell side and the buy side.
“It is important for advisors or the folks who are trying to sell a business to engage in the conversation with the potential buyer of the company, and get to know what they know. How are they thinking about growth? Where do they think the strengths and weaknesses of the business are? Narrowing the number of buyers can be based on this call. Are they asking the right questions? Are they fully engaged? Have they done the homework on the industry?”
Abhik Jain grew up in India and moved to the U.S. in 1999.
He has lived all over the country and has extensive experience in the areas of investment banking, private equity and most recently corporate M&A.
Jain’s experience includes having worked both on the sell side and also the buy side, he shares with Kison his strategies for the negotiation process.
Jain emphasizes that it is important to be honest and keep your integrity while negotiating, and that you should ask yourself the level of transparency that you want to have with the other party.
You will have more opportunities to leverage the auction process when you're on the sell side.
When you’re selling a business, it allows the sellers and their advisors to create a competitive situation where they may not be one, but you can create an aura of competition the get the best price you can.
“There are times on the process when that leverage shifts, and part of the deal making is anticipating and understanding what those parts of the process are.”
The ultimate goal is to get the contract right.
He advises sellers to do your their own due diligence on the business they are trying to sell.
“Spend two or three days with the manager of the business and ask all questions and evaluate all areas. Also, be very upfront about the issues that exist with the business and don't hide them.”
Public sales, however, require more preparation, more focus on confidentiality and more advisors working on both legal and financial areas.
It is important for advisors and the people who are trying to sell a business to engage in the conversation with the potential buyer, and get to know what they know.
How are they thinking about growth.
Where do they think the strengths and weaknesses of the business are?
Narrowing the number of buyers can be based on this call.
When selling, Jain suggests to stage that you’re prioritizing one or two buyers against the others.
You want to give the sense to the buyer that he has got a shot.
When it comes to the buy side, investment advisors that really take the time to understand the focus areas of other companies in the long run bring a lot more value than the ones who run broad auctions.
Jain recommends working with with strategic-thinking bankers.
His tactics for broad auctions include understanding what the motivations of a seller are.
If it’s an entrepreneur who started a business 20 years ago and is now selling it, you should treat it with respect and care.
To them, the legacy that they leave behind may be more important than its value.
“You could keep bidding up the value and ultimately not win (the bid) because you failed to understand that what really motivates this person selling the business was that they really wanted to actually be a part of a larger organization that will take them to the next level.”
In his experience, deal-breakers include combined violations, specially is they are repeated, and unexpected issues they may find while doing environmental diligence, and intellectual property issues.
If a small company is committing infringements, they may not be a target because of their size, but if it is bought by a company with deeper pockets they may become a target.
In case you miss to see the red flags and get to the formal M&A process, you will have to go back to the deal and you re-read it. This is why it’s so important to have advisors, both on the sell side and the buy side.
“Be honest at all times. Maintain your integrity. Get into the details and actually engage with the content besides the process, especially on the buy side.”
For more insights, listen to the full episode.
00.00 / 05.0 Differences between PE, investment banking and M&A
05.00 / 10.00 Tactics from the sell side and the buy side
10.00 / 15.00 Tips from handling M&A from the sell side
15.00 / 20.00 Selling strategies
20.00 / 25.00 Proprietary deals vs auction deals
25.00 / 30.00 Planning diligence from the buy side
30.00 / 35.00 Risks during transactions and deal breakers
35.00 / 40.00 Unexpected post-closing surprises and personal advice
Join us next week when we uncover more secrets to successful M&A transactions.