Hanging Around the Hoop
Often times during the competitive nature of the bidding process in merger and acquisitions, you will walk away from a company having lost the bid. However, how you handle the next steps in the process is crucial. Lakelet has often found that we will receive a call from a company 6 months after we lost the bid to acquire them. We find it's important to respect the exclusivity of the owner of the bid, but also make sure your firm is recognize as a serious business partner so that you are always in the back of peoples' minds. Instead of being a nuisance, inform the company of your disappointment and reassure them of your interest and then wait for them to come to you.
Reasons a company and the original winner of the bid might not succeed long-term include:
- The winner overbid to be the highest bidder against the competition, but then they nickle and dime the company in expenses moving forward;
- Private equity firms are viewed more as a financial instrument instead of a strategic partner;
- Surprises in the due diligence process due to lack of industry experience;
- If a broker is involved, there aren't enough direct conversations with the owner and buyer, which can result in relationship issues down the line; and
- The due diligence process can become a fire-drill, with a deadline of 60 or 90 days, which some firms are unable to handle.
These reasons stress the importance of not burning bridges and making continuous improvements on your reputation as a strategic partner. You never know where the ball is going to land, so it's imperative to hang around for a while.