Who you hire has a big impact on your company. When you get key hires right, it can take your company to new heights. That’s why, when someone is interested in buying your company, it is paramount for them to understand the strengths of the team, as they are ultimately investing in the people. So how do prospective buyers evaluate your people when they’re evaluating your company throughout the mergers and acquisitions (M&A) process?
The best measurement of your people and your team as a whole is the management team. One of the key factors prospective buyers will evaluate is the depth and breadth of your management bench.
Your management team plays a specific role in the M&A process. With the right leadership hires, you can help prepare both your company and the leadership team to navigate the process successfully.
The Management Team’s Role in M&A
In football, players on the field do blocking, tackling, and playmaking to make sure the quarterback has time to get the ball where the team wants it to go. Your management team will be doing something similar as you enter the M&A process.
Not only will they need to keep the business running while you navigate meetings and due diligence, but they’ll also be providing the information and data you share on the business and will be meeting with prospective buyers throughout the process as well.
Your management team will play a critical role in quite a few areas both before and during the M&A process. They will:
- Ensure the company continues to meet business goals and milestones in a productive and efficient way independent of the M&A event
- Organize and provide the data to will be shared with prospective buyers
Sharpen their understanding of current processes and results as well as opportunities and weaknesses
- Prepare to speak knowledgeably about where the company has been and where it is going
- Clearly articulate the value proposition, differentiation, and vision of the company to the buyer community
After the M&A process is complete and you begin the transition, your leadership team, depending on the partner, will help you ensure continuity and a continual focus on your business goals.
As a CEO of a SaaS company, you have a wealth of information to share with prospective buyers about the opportunity your company presents. This covers everything from the financial performance of the company to forecasted growth, but sharing the qualitative factors that help your company stand out can be harder to prepare for.
An M&A advisor can help your management team prepare. Our team at Software Equity Group helps company executives articulate where the business is today and create a narrative that’s compelling and interesting to share with the buyer community.
This narrative needs to address who the company serves, what you do for them, why you do it, and what sets your company apart from the field. Once your management team has that narrative in place, they can start articulating the value of the company with you.
How Your Management Team Shares the Past While Selling the Future
One of the best ways to evaluate the people within your company is to look at the management team. They are the best proxy for your team’s strengths. The role they play in setting and carrying out objectives is how prospective buyers can evaluate the people they’ll be investing in.
So while your executive team is crafting a narrative about the company, help them start thinking about the business strategically. Each member of your management team will have a different perspective on where the business is, and they’ll need to be ready to generate the information from their perspective to sell the buyer community on the value of it.
Your management team will need to be able to articulate how your company has performed in the rearview mirror. They’ll need to have a good pulse on what your business really is and how they can talk about it.
They need to be able to talk about:
- Product & technology
- Competitive differentiation
- Market opportunity
- Business challenges
- Functional operations
Once prospective buyers know your management team has a good understanding of what has happened in the business so far, your management team will need to sell the vision.
Your management team will need to be able to speak to where the business can go; They need to understand where the easiest growth opportunities are and where the company should head; They need to have a deep understanding of the mission and vision of the company and how that translates into actionable opportunities.
Working with an M&A advisor will be critical. An advisor can help your team craft how they’ll discuss the visions, goals, and opportunities for your company.
How a CEO Can Showcase a Strong Management Team
While your management team will be blocking and tackling for you, preparing and presenting the hard data about your company, how will the team be evaluated? How can you, as a CEO, prepare your management team for an evaluation?
Prospective buyers for an M&A transaction will look at the depth and breadth of the management team. This is a qualitative analysis focused not on the hard numbers of your business but on the track record, experience, and ability of your management team to speak to the business.
Your management team will impact a deal in many ways:
Depth and breadth of the management bench.
Prospective buyers will want to know that you don’t have a dependency for key operations in your company on one or two people. They want to see some management redundancies, showing aspects of the business are not entirely dependent on a single person.
Waiting on key hires.
Often, as companies scale to new levels, they’ll need to add additional critical pieces to their management team. For scaling software companies, often they may just be entering a phase where they need to hire a Chief Financial Officer (CFO). They may need to replace a VP of Sales with someone who has experience scaling past $10 million ARR. Making sure your management team has all the pieces in place will be an important step in preparing for an M&A transaction.
Stability in key roles.
Scaling companies will experience turnover in their management team. If a SaaS company is approaching an M&A transaction having just replaced its management team with all new people, it could indicate a lack of cohesiveness around the vision of the company.
Diversity of experience.
Depending on your industry, prospective buyers will likely want to see a management team that includes both experienced executives who have tenure and proven track records next to younger leaders who are leading new ideas and growth for the company.
Getting Your Management Team Ready for an M&A Transaction
How will you know your management team is ready for the spotlight of an M&A transaction?
If your business is growing, then you and your management team are definitely doing something quantitatively well. Digging deeper, your management team will need to be able to identify why the company is growing while pointing out where the business strengths and weaknesses may lie.
It may feel like a tall task, especially for a CTO or VP of Finance who doesn’t feel like much of a salesman. But an M&A advisor can help your team be prepared.
At Software Equity Group, we’ve worked with hundreds of companies just like yours to ensure they’re prepared for the whole process. We are wholly focused on guiding your team through the entire M&A process and will help you prepare to reduce risk, position your company for success, and find the right buyers for your company.
Talk with us to see if your company is ready to embark on the M&A process, and we’ll work with you to evaluate all the critical pieces of your business buyers will want to see and help you be prepared to meet your goals for a sale.
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