I have gone through many screening interviews in the process of selling my company and through the process of M&A deals of our customers as a consultant and a strategist. While there is no one way to ensure that the interview will go exactly like you hoped it would, there are some things you can do to move the ball further down the field.
Firstly, proper exit planning and staging is a must
The most important thing you will do in the process of selling your business is to plan for the exit of your business and staging the company in a way so that it is very palatable to those premium buyers who will pay above and beyond the industry multiples or standard financial valuations.
If you are not sure what exit planning and staging entails I suggest you research online. I have written an article on this — that can be a good place to start as well.
If you are not sure that you have planned your exit in a detailed manner, staged your organization so that it is completely ready for due diligence, and discussed the details of your tax and finances with your CFO/CPA/independent consultant, you should not start marketing and accepting screening calls from buyers. Even if you are in a rush to sell/liquidate, it will save you a lot of time, money and resources if you do proper exit-planning and stage your organization for success during the sale process.
How do the screening interviews get setup
You should have sent out your CIM to prospective buyers that have signed a proper NDA after reading the teaser that was created to market your business confidentially across different channels where prospective buyers are searching for companies like yours to buy.
If you are not sure of what a CIM is and how to create one, I have written an article on this. This is probably the most important piece of document you will write for your business, so please take the time to create one. Similarly, if you or your broker have not created a teaser, then that is something that has to be created before marketing your company. A teaser will typically be an executive summary of your company without divulging anything confidential, no names, no locations, nothing. In mid to large sized companies, bankers and brokers will not provide any expected purchase price as they would like companies to bid. For small businesses, there is typically a purchase price, but these are not written in stone because purchase price is typically set after due diligence and negotiations.
Based on the teaser, prospective buyers will be asked to provide information on themselves before the CIM can be sent out. Such information could be proof of funds, experience in the industry, experience as a buyer etc. You can set such selection criteria with your broker. It is really up to you to see how much you want to filter out at the early stage. Typically proof of funds is something that is almost always required.
Once a buyer has been screened, an NDA is signed and the screening interview is set.
Preparing for the screening interview
You should prepare for a general screening interview first. Firstly, make sure you know every part of the CIM. If you say something that contradicts anything in your CIM, that is a red flag right at the get go. If you see anything in the CIM that is incorrect and false, it should not go into the CIM. Trust me when I say this, it will come out during the screening interview. If you somehow manage to get past it, it will surely come out during due diligence. And by some miracle it passes due diligence it will come back post-sale and you can get indemnified for falsification. Finally, you will have this unsettling feeling even after your sell your business if you have falsified anything or misrepresented anything. Why risk it? It is better to present your business as true as possible. If you think there are red flags that will prevent your business from getting sold the way you want it, it is better to take some time and fix them — or transfer them (outsource for example) — or be ready to take a hit.
Write out your pitch. This is key. Your thoughts are much better presented, once you write it out. It does not have to be a work of literature. Just write like you would speak. You can use voice to speech on your phone or your computer. Then, memorize the main points and start pitching to a recorder.
When you write your pitch, refer to the CIM. Assume that your prospective buyer has skimmed through the CIM and now is here to find out more and see if they are going to move to the next stage of sending you a letter of intent to buy. This should be easy — if you are a business owner you should have spent most of your time selling and marketing your company. This is no different.
Practice, practice, practice…be over-prepared. Even if it sounds rehearsed, it is a lot better than “wingin it”. Record yourself in front of a mirror and listen to how it sounds. Tweak. Repeat. Till you feel great about your pitch.
Next, think about the most critical person you know. Ask him / her to critique you as you present your company for the 1st time to a prospective buyer. He / she does not have to be an expert in your industry. Ask your confidante to just listen, ask questions, challenge you and then provide general feedback.
For each buyer, research the person or person(s) that will be there in the interview. Search them on LinkedIn, Facebook, Twitter, Instagram, Quora — anywhere you can find them. See what they comment on, how they comment. Read any articles, blogs they have written. Understand their accomplishments. You are trying to create a mental profile of that person. Ask yourself this first. Will this buyer be able to grow your business after the sale? If the answer is not an overwhelming yes, I will advice that you clarify this with your broker. It is not just about closing the sale. The post sale is as important, if not more important. Also, if your buyer is really not the right person to grow your company, you will be wasting time anyway — he / she will figure it out quickly (hopefully) or eventually (after wasting a lot of resources).
Practice pitching to the prospective buyer — this will be a phone interview, most likely, so call into a conference bridge (there are several for free) — you can download zoom conference for free (if you do not have any meeting software) and record yourself.
When you cannot wait to get to the screening interview you will know that you are ready!
The process of screening interviews
Typically your broker will start the call, introducing both parties. The buyer goes first and introduces himself / herself. Work with your broker so that he / she knows to start the call that way — asking the buyer to introduce themselves, what got them interested in your company and why they think they would be a good buyer. When they speak, observe carefully, make handwritten notes — you should be able to address any early concerns early on as well as capitalize on interests early on.
When your turn comes — this is the time you should have been waiting for. The time to shine is here and you are ready to do this.
“Selling is a transference of feeling” — Zig Ziglar
If you are passionate it will come through. If you are genuine it will come through. If you truly believe that this buyer will be able to grow your company and reap all the benefits of investing in the purchase, it will come through. The converse is true as well. Seasoned buyers know how to spot the red flags.
I recommend that you start by saying something like this “I am sure you have read the CIM. But I will go through the company in detail — starting with how and why I started the business, how it grew, the industry, our markets, segments, business units, services and products, customers, competition, our suppliers and partners. Then I will focus on our operations, the structure of the company, day to day activities, key personnel, finance and legal. I will also discuss how to grow the company with risks, opportunities and assumptions. Finally I want to talk about why I have decided to sell the company. This will take about 20–30 mins, following which we can discuss specific questions — I believe this will the most productive way to get us through this call. Hope this works?” Almost always, the answer will be “yes”. If no then see what the buyer is asking for and keep getting back to “why don’t I take your through our company like I suggested?”
Either way, you will come to the point where the buyer will ask you questions and comment on what they have heard. Try to think about these in the light of “is this the right buyer for my business?” If the answer is almost always “no” — I suggest you make a note of that and try to end the call so that you can think and discuss with your broker / team. If the buyer asks you about how you came about your valuation or price, ensure that your broker is well-equipped to handle that. The most important thing to remember, is that at this point you should not be negotiating anything with a prospective buyer.
Finally, the buyer will ask you if you have any question(s) for them. This is a great chance to find out anything you want to know about the buyer. Steer clear of any negotiating type of question or financial question at this stage. Do not be hesitant to ask any question. This is not the last buyer! Ask questions that will help you answer the most important question “Can this person run my company and grow it?”
Thank the buyer for their interest and time and say that you look forward to next steps. Do not be too eager, over-bearing or desperate. Keep a good composure during the call, stay calm, handle the red-flag questions honestly with solutions or “I will get back to you on that shortly after the call”.
The screening interview is a lot of fun and excitement. You get to talk about how great your business has been and all the exciting things it can achieve given the new resources that a buyer can bring to it. Do not worry about losing a deal. Focus on staying positive. Smile and enjoy the process. You will be able to reflect back and feel empowered after the process. A good screening interview is a first step towards creating a lasting relationship with a buyer — one that will continue well past the sale, whether you stay on or exit the business.