Today, you might sell your startup without ever meeting the buyer in person. While this might make acquisitions easier, you and the buyer must work harder to establish trust. Don’t be surprised if your interested buyers ask for a call with you and your management team.
What’s a management call? Well, it’s exactly how it sounds. The buyer’s team and yours get on a call to establish commonality and culture fit. It’s an opportunity for you and the buyer to align on goals before investing more time, money, and energy into moving things forward.
When might it happen? Usually after preliminary talks and initial due diligence, but before the buyer has sent an indication of interest (IOI) or letter of intent (LOI). You might need several such calls to settle any outstanding inquiries to move your acquisition forward.
While a management call helps to mitigate the buyer’s risk, it’s also a chance for the buyer to build rapport with your team. You might be the person selling the startup, but your senior team helped build it and might even stay on after acquisition. The buyer will want to meet them.
Is it possible to mess up a management call so badly the acquisition never happens? Yes, but it’s unlikely: You’d have to do, say, or reveal something utterly unexpected to derail progress. Nevertheless, you want to make a good impression, so preparation is key as always.
When Should You Expect the Call?
The nature and purpose of a management call depend on how big your startup is, how you’re selling (alone versus with an acquisition professional), and where you are in the process.
As noted in the introduction, a management call usually happens before an LOI. If you’ve listed a smaller startup on Acquire (an asking price of under $1 million), your potential buyer likely wants to confirm some of the information they’ve already seen.
Perhaps they’ve reviewed your listing (domain, metrics, pitch deck, and so on) and want to learn more about your goals. Also, this could be your first interaction: You might jump on a call within minutes of granting a buyer access to your startup’s private details.
If you’re selling a larger startup, you’ll probably hire an acquisition professional to field buyer inquiries for you. Once a buyer has signed a non-disclosure agreement (NDA) to read your confidential information memorandum (CIM), they’ll want to ask follow-up questions.
Until now, your investment banker or other acquisition professional has done the hard work for you, sending emails, leading meetings, and narrowing your shortlist. Now the buyers want to talk to you, and as they’re the most promising, you want to be at your best on this call.
What Kind of Questions Will Buyers Ask?
Again, this is somewhat dependent on your selling process and how much work you’ve already done. If you’ve revealed everything you can on paper, the buyer might simply want to get to know you and hear your story in your own words. Or, it might also be a data-gathering mission.
To understand what questions are likely, you need to get inside the head of your prospective buyer. They might’ve spent hours going through your marketing material and talking to your advisor and now have a list of questions to help them decide whether to pursue the deal.
For example, your buyer is probably wondering how your startup fits into their investment portfolio, how they can increase value, and whether it’s a good culture fit. They also want to make sure what you tell them on the call aligns with what they’ve already seen on paper.
They also want to hear you tell your startup’s origin story. How did you grow the business in those early years? Why are you exiting now? They’ll probably ask how they might scale the business further, what opportunities and threats you foresee, and lots more.
Memorize your CIM and marketing material so you can answer questions on everything buyers find online (and in your data room). Delegate technical questions to those best qualified to answer – give financial questions to the CFO, operations questions to your COO, and so on.
When working with an advisor, they can prepare you on the most likely questions based on their past interactions with the buyer. As well as answering the buyer’s questions, take note of their personality and motivations while asking questions of your own.
How to Prepare for a Management Call
Preparing for a management call is similar to preparing for an investor pitch. It doesn’t matter if you’ve raised money from an angel or VC, you’ll have answered questions similar to those you’ll get in a management call. It’s all about mitigating risk and demonstrating a future reward.
Get the Right People on the Call
If you’re selling your company alone, you might need to kiss many frogs to get down to your core two or three buyers. Fielding such inquiries takes time, and you might want another person in your team to do this for you. Or, better yet, hire an M&A professional to whittle down your list.
If you plan to leave immediately after the acquisition closes, tell the buyer early on and reassure them that the people staying can still run the business (assuming the buyer needs some time to settle in). Getting those senior people on the call will help calm the buyer’s worries.
Similarly, you want people who’re responsible for the core value of your business, such as a CTO if you operate SaaS, to attend and answer technical questions. That said, only invite those who intend to stay on otherwise the buyer might insist that they stay on as part of their offer.
Embrace the Unexpected
No matter how well you know your business, the buyer might still ask questions you can’t answer. That’s okay. Don’t try to fumble an answer off the top of your head. Instead, ask to get back to the buyer on that point, or if someone else in your team can answer, let them do so.
You probably won’t have one management call. You’re trying to attract an LOI while the buyer is trying to build confidence in you and your startup – one call is rarely enough to achieve both. Not only must you cover a lot of ground but get to know each other as people, too.
Also, reverting to the buyer later within a certain timeframe shows trust. The buyer will get the impression you’re serious about giving them the correct answer and not trying to pull the wool over their eyes. Being honest about what you don’t know is a positive sign.
While you must help the buyer mitigate risk, you can’t eliminate all of it. At some point, answering hundreds of questions is going to get tiresome. Set a deadline for receiving an LOI that gives everyone enough time to decide, but not too long that the deal loses momentum.
Remember you might court several buyers at once, and some will ask more questions than others. You might receive an LOI for a lot less than your goal, but, depending on your reason for selling, it might beat waiting on a higher offer from a buyer who’s yet to confirm anything.
Selling your startup is a full-time job and there’s nothing worse than dealing with nervous or demanding buyers when you’re already pushed for time. Head off this issue by setting clear deadlines before and after the call. Anyone who doesn’t want to participate will drop off.
Perform Due Diligence on Your Buyers
The management call is also your chance to ask questions about the buyer. You should already have vetted them beforehand, in which case, the call might just be about aligning on your goals. An acquisition professional can save you a ton of time here, but typical questions include:
- How much funding do they have?
- Have they made acquisitions in the past that are in the same sector?
- Do they have a platform company that this would roll up into?
- How often do they make investments?
- Where are they in the life cycle of their fund?
- What’s their normal deal size?
- What types of deal structures do they like?
As you progress through the acquisition, you’ll slowly stack positives until you build enough momentum to sign the LOI and go into that quiet due diligence period with one buyer.
Early vetting ensures each stage of the process – due diligence, negotiation, and so on – goes smoothly. If your vibes clash, it might be worth walking away.
Management calls might seem daunting if you’ve never done them before, but if you know your business well (which you should), you’ll do fine. Be yourself on the call and transparent about your startup’s strengths and weaknesses. Buyers will appreciate you for that.
The content on this site is not intended to provide legal, financial or M&A advice. It is for information purposes only, and any links provided are for your convenience. Please seek the services of an M&A professional before entering into any M&A transaction. It is not Acquire’s intention to solicit or interfere with any established relationship you may have with any M&A professional.