Chapter 23Activate Outbound, Plant the Seed
This is the most exciting and perhaps the most straightforward step in an M&A. The bottom line is, you spent months if not years preparing for the company to be ready to be presented to potential suitors, now it’s finally time to send out the emails to everyone on the target list (see Chapter 14) and gauge the interest level for your company. The goal of the outbound reachout is to keep it simple and actionable, you can use the templates below for your email.
First, if you have actionable offers, then it’s super simple. Make sure your email has only one recipient. Too many recipients will dilute the urgency and ownership of your reachout.
Subject: [Your Company] M&A Update
Hi [Executive of Potential Acquiring Company],
I wanted to be the first to tell you that we are starting a M&A process. Recently, our board received an actionable M&A offer, and wanted to run a process and invite you to be part of it as we value our relationship and feel that the potential of teaming up with [Acquiring Company] could create the biggest impact.
Let me know if this might be an actionable opportunity for you.
Thanks,
[Your Signature]
[Your Phone Number]
Now only send the above email if in fact you already have an offer you are willing to accept. And absolutely do not mention who has made this offer to you. This maximizes your leverage and also protects against reputational and legal risks. Furthermore, don't send the above email if the offer you have is weak or non actionable, and definitely do not lie when you do not have any offers. The above email may all of a sudden become the highest priority task of the recipient, and if that's the case, she would work overtime to pull in the right decision makers and resources to analyze this opportunity. Expect thorough follow-ups which if you lied, you will need to make up more lies to cover the initial lie. Eventually, everything will come crashing down. So the simplest thing is, just don't do it, your reputation will be preserved and you will also sleep better.
Alternatively, if you do not have any offers but are starting a M&A discovery process anyway, use the template below:
Subject: [Your Company] M&A Update
Hi [Executive of Potential Acquiring Company],
I wanted to give you two updates on [Your Company].
First is our latest [key business/product update that is relevant to the acquiring company, something that is short and sweet and noteworthy. If the acquiring company cares about a particular market, tell them your ARR or growth rate in this market crossing a key threshold. If they care about a particular technology, mention a breakthrough in your R&D or a big product launch with this technology deployed, etc].
Second is that we have decided to fully explore M&A starting this quarter. This isn't driven by operational constraints (we have a strong balance sheet), but rather our desire to find a larger platform to make a bigger market impact.
In advance of that effort, I wanted to reach out and see if this might be an actionable opportunity for you, and we wanted to give you an early look at the opportunity.
Attached is a short deck.
Thanks,
[Your Signature]
[Also attach a shortened version of the deck you prepared in Chapter 15]
The first key idea is to get straight to the point. Contrary to popular advice from most bankers and advisors, where they tell you to keep the message vague and instead of explicitly mention M&A, to use words like partnership or synergies. I caution against this approach as executives' time is precious and emails that are vague or take too long to get to the point are ignored or left unread. If you have a relationship with the potential acquirer, don't beat around the bush and jump straight to the point. Tell them exactly what you are looking for.
Secondly, give the recipient something to chew on. Place a bet on a strategic direction that the acquirer cares about, and put down some milestones that you recently achieved that would get her to read this email a couple times.
Finally, I would not recommend doing a mass email campaign to any and all companies that may have anything to do with your company with the above template for an outbound reachout even if you already have a strong actionable offer. It firstly sends the wrong signal that this could be interpreted as a firesale. Moreover, M&As are built on trust and relationships. For a company that does not have a relationship with you to begin with, I would try to first work on establishing a relationship with them first before approaching them with a solicitation for M&A interest. Quality trumps quantity in the M&A game, it’s always better to be selective and personalized when it comes to outbound reachout.