Insights from Deal Leaders International
In the fast-paced world of mergers and acquisitions (M&A), business owners often find themselves at a crossroads when considering growth or exit strategies. The uncertainty and indecisiveness surrounding these decisions can have significant implications for their businesses. However, it is crucial to recognise that M&A remains a pivotal driver for business growth. In fact, the South African market continues to attract significant international buyer interest, with an average of four offers per transaction (in our experience). Nonetheless, it is important to acknowledge that deals are taking longer to conclude because of heightened due diligence requirements in the current political and macroeconomic environment.
As an experienced sell-side M&A advisory service, we at Deal Leaders International (DLI) work daily in the trenches to assist business owners in navigating these challenges. We understand the complexities and myths surrounding the process of selling a business. This article aims to provide valuable insights and dispel misconceptions. Our goal is to bring a dose of reality to the table and help business owners make informed decisions about their growth or exit strategies.
1. The Dangers of Indecisiveness: One of the critical challenges facing business owners is the indecisiveness to explore a partial or full exit strategy. Many owners are hesitant to make a decision, waiting for more favourable conditions or clinging to a false sense of security driven by good business performance. This holding position can be detrimental as uncertainty continues to loom in today's volatile market.
2. The Perils of Going It Alone: We caution against the temptation for business owners to handle the sale process independently or hastily accept offers from interested parties who may not be the best fit. We have seen many real-life examples where business owners took this route and encountered setbacks, losing valuable time and opportunities. That is why working with experienced advisors like DLI, who bring specialised expertise, extensive networks, and a proven track record to the table, is critical for success.
3. The Importance of Time and Process: We at DLI believe in the urgency of taking action and engaging in the M&A process rather than delaying it indefinitely, because every day that passes without progress can result in missed opportunities. We have a saying in our business, "Lose a day, lose a week, lose a month, and probably lose a deal," which underscores the need for proactive decision-making.
4. Exclusivity and Deal Control: There are many risks associated with granting exclusivity to potential buyers too early in the process. Exclusivity should only be given when a term sheet is signed and all due diligence has been conducted. Granting exclusivity prematurely could leave the seller vulnerable to renegotiated terms and a reduced sale price. That’s why it’s also important to follow a thorough process and ensure all necessary information is shared before committing to exclusivity.
5. Choosing the Right Advisor: When it comes to the M&A service provider landscape, we see two extremes: business brokers and investment banks. Business brokers often employ a high-volume, low-touch approach, focusing on quick deals and lacking extensive networks or confidentiality measures. On the other hand, investment banks may lean towards a more theoretical and financially driven process, neglecting crucial people and strategic elements. We at DLI aim to strike a balance between these extremes, offering personalised guidance, comprehensive networks, and a focus on value creation.
6. Succession Planning through M&A: Succession planning is a common challenge for business owners looking to exit. However, the succession issue can be addressed through strategic partnerships forged during the M&A process. These partners can help identify suitable successors, build management teams, and mitigate risks. By engaging in a deal that includes a commitment to manage succession over a specified period, business owners can ensure maximum value for their businesses.
About Deal Leaders International (DLI)
DLI is a sell-side advisory firm specialising in guiding privately owned businesses through their growth or exit strategies.
By leveraging our expertise and extensive network, we assist clients in identifying qualified buyers, conducting thorough due diligence, and structuring successful deals. We understand that each business is unique, and we tailor our approach to suit individual needs and objectives. Our advisory team is dedicated to guiding business owners through the entire M&A process, from initial assessment to final negotiations.
We believe in the power of knowledge and transparency. We aim to equip business owners with the necessary tools and information to make confident decisions about their businesses. Our commitment to excellence and our track record of successful transactions have earned us a reputation as a trusted partner in the M&A landscape.
Our approach is rooted in the core principle of putting the seller first. Leveraging our vast local and international networks across more than 20 geographies, coupled with our extensive research capabilities, we excel in identifying the most suitable acquirers, strategic growth partners, or transformation capital (BEE) partners to meet the unique requirements of a seller's exit or growth strategy. As the Africa representative of the Pandea Global M&A network and with strong alliances with CapEQ and Onyx in the UK, we provide unparalleled access to a pool of high-net-worth acquirers and strategic partners.
Our entrepreneurial DNA is characterised by a can-do attitude, always focused on "how we can" rather than "why we can't." Our commitment to delivering exceptional professional services, execution capability, governance, and confidentiality make us the go-to choice as sell-side advisors for owners of privately owned businesses.
We invite business owners who are considering growth or exit strategies to reach out to us and explore how our services can benefit them. By partnering with Deal Leaders International, business owners can gain a deeper understanding of the M&A process, leverage our networks and expertise, and position their businesses for success in the dynamic world of mergers and acquisitions.