Writing your M&A playbook: A strategic exercise for sellers

by Everingham and Kerr

If you’re thinking about selling your company, consider assembling an M&A “playbook.” The process can help put you in a merger mindset and enable you to make an early assessment of your company’s key selling points and possible weaknesses, as well as identify opportunities to enhance value.

A frank assessment

A playbook isn’t a white paper or formal presentation, but a critical self-assessment meant for your and your managers’ eyes only. Ideally, it should help your deal team get the business in fighting shape before it enters the M&A marketplace.

Your playbook can cover several subjects, but three critical ones for most companies are:

1. Strengths.

What makes your business unique?
Which are your bestselling products, most lucrative client contracts or most valuable intellectual property? Pinpoint your most promising research and development projects and management strengths. You’ll want to emphasize such features when you decide it’s time to sell.

2. Weaknesses.

Where is your company vulnerable? Are there market sectors in which you’ve failed to gain a foothold or where you’re losing out to competitors? Do you rely on a few key people or customers for your business’s success? Pay particular attention to underperforming products or divisions and red flags in your financial statements, such as excessive debt or volatile earnings. When you sell, you’ll want to play up how you remedied weaknesses — or describe continuing efforts if a fix is still in the works.

3. Market position.

How does your company rank among competitors in terms of market share and earnings? What would it take to improve your market position? For example, a modest infusion of new capital or synergistic sales teams might be all you need to catapult to the No. 1 spot.

Buyer’s eye view

To ensure you’re being as objective as possible, draft your playbook from a potential buyer’s perspective. If you feel uncomfortable playing the buyer’s role, consider enlisting the help of experienced M&A advisors who are familiar with your sector and what actual buyers are currently seeking in an acquisition.

If your company needs major operational improvements or is in worse fiscal condition than its competitors, it’s far better to discover this at the playbook stage than when you’re courting buyers or facing due diligence scrutiny. Some problems may take several years to resolve. Others may not be fixable. In that case, decide how you’ll cast weaknesses in the most positive light without being dishonest.

The buyer scorecard

Playbooks are about more than navel-gazing. Business sellers should also use them to review and rank prospective suitors. You never know where you’ll find a buyer — from among the ranks of your closest competitors to a large, diversified company that’s trying to gain a foothold in your industry.

Evaluate potential buyers on several fronts, including their:

  • Deal history, such as the number of acquisitions they’ve made and how successful they turned out,
  • Capitalization and whether they’re capable of making a cash acquisition or have secured financing from another source, and
  • Similarity of culture and whether the buyer will expect your company to adopt its own.

The process of compiling a list of potential suitors is worthwhile, even if your eventual buyer isn’t included. As you drill down into the pool of potential buyers, you and your managers will begin to draw a portrait of the ideal buyer. Many first-time sellers prioritize price, but the more buyers they consider, the more likely they are to put a premium on such qualities as assured financing, congruent corporate culture and integration experience.

Strategic tool

If the assessment exercise reveals that your company is in good shape to sell, the next step is to devise a selling strategy. Start by making personnel assignments for such important tasks as screening potential buyers and preparing due diligence materials. Some companies choose to involve only a few upper managers, while others assemble a larger, more inclusive deal team.

Also determine deal terms and pricing issues so you’re prepared to have quality discussions with prospective buyers. You likely have a list of “must haves,” such as a range of acceptable prices, a tax-efficient structure or certain seller protections.

Document them in your playbook so you don’t later lose sight of what’s important. Also use your playbook to sketch a rough timeline. Will you be ready to put out the “for sale” sign in the next two months or two years?

Consider everything from your current debt load to future earnings projections to the strength of the general economy.

Practice is essential

Of course, there’s only so much planning you can do. Real-life M&A deals often lead in unexpected directions. But a playbook gives you a chance to carefully assess your business and map out a selling strategy. Even if you don’t intend to sell anytime soon, this exercise can help you focus on strengths and fix any weaknesses so that your company will one day be a desirable acquisition target.


Grimes, McGovern & Associates provides expert advice during all phases of a transaction. Contact us today for a confidential consultation: John McGovern, CEO, [email protected], (917) 881-6563.

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