An advisor recently wanted some advice about selling his independent firm. He said he had read that the key to successfully buying or selling an advisory business is to know what you want. Then he rattled off his “want” list, and asked me if he’d left off anything important.
I too had heard this conventional wisdom about advisory M&A too, and generally believed it. But in that moment, with the advisor stating it with such certainty, I realized there was a better way.
My answer surprised me. “Instead of going into negotiations to sell your business with lots of ideas about how you want it to work out, try sitting down with an open mind and just listen to what the other party has to say.” Not surprisingly, he was less than impressed.
Yet, the more I think about it, the more my off-the-cuff response seems like the best advice. Here’s why: When we sit down to a meeting “knowing” what we want, it blinds us to other possibilities. We’re so focused on “getting” what we want that we usually don’t stop to consider other ideas. I know this may come as a big shock, but sometimes other people have good ideas, too.
That doesn’t mean you shouldn’t have your ducks in a row when you sit down to the negotiating meeting, but you should never sit down for that final meeting until you are ready. And part of “getting ready” is to explore all the reasonable possibilities.
Therefore, when you go into that initial M&A meeting — whether you’re the potential buyer or seller — go into it with an open mind. Don’t be so focused on what you want. There will be plenty of time to figure that out later. And try not to say any more than you have to. (I know, that’s hard for me, too.)
Instead, look at that first meeting as an opportunity to find out what the other folks are thinking. Consider it a learning opportunity. Ask a lot of questions, and really listen to the answers. Ask follow-up question and learn as much as you can.
Try not to form any opinions about what you hear, and be careful not to reveal them, if you do. Again, there will be time for that later — if you get to that stage.
Instead, try to draw out the other side with encouraging — if non-committal — comments, such as: “That’s an interesting idea,” or “Tell me more about that,” or “Wish I’d thought of that.” Your goal is to get them to open up, so keep talking — but don’t revealing how you really feel about anything you hear. This is not the time for judgement. That can come later.
Take the time to analyze what you’ve heard after you and your team (if you have one) have digested what you heard. Then you can analyze it with an open mind.
What did you hear that you liked? Why? What surprised you? Were there any new ideas that you hadn’t thought about? Were any good ideas? Were any so good that they’ll change the way you want to do the deal?
Finally, think about what you want. A happy unintended consequence of having that first meeting without pre-conceptions is that what you hear will almost always help you decide what you do and don’t want.
Sometimes you’ll hear new, good ideas that you’ll want to incorporate into your vision, too. But even more important is that hearing others’ ideas often gives us a much clearer picture of what we don’t want.
At the end of the day, having an initial meeting about selling your firm or buying another firm without any preconceived notions about what you are looking for can reveal new possibilities and help clarify what you really do want.
For the small price of an hour or two of your time, you’ll be far better prepared to have the next meeting, which can be about what you want. If you enter into the meeting simply with the motivations of learning and curiosity, I promise, you’ll find it along the way.