The old saying, “You never get a second chance to make a first impression,” applies to much in life but nothing more so than the investment “teaser” you are going to create to attract buyer interest in your business. Also known as the Confidential Business Profile or the Profile Letter, the document is vital to attracting and keeping the attention of a potential buyer. Recently, Axial, an online network that connects business owners with capital providers, did an overview of what they see as critical in creating an effective profile letter. Some of their ideas include:
Each of these is equally critical in the creation of a teaser that will attract buyer attention. Allow me to amplify on these based on our years and years of experience in creating successful profile letters (our success is measured in our regular appearance in the Thomson league tables).
First, fundamentally your teaser should clearly allow buyers to understand what your company does, how it makes money, how it differentiates itself, and – most importantly – why your customers buy from you as opposed to going elsewhere. Far too often inexperienced profile letter writers fill up 2-3 pages with jargon and language that is indefinable. Avoid terms like “industry leader,” “unique market position,” “unlimited potential growth,” etc. Simply state the facts and let them attract and sell the buyer on the business.
In addition, it goes without saying but I will say it anyway: Tell the TRUTH! You will be tempted to embellish (for example, a huge percentage of resumes contain lies, according to experts), but ignore this temptation. Again, let the true facts of your opportunity sell the buyer on your company and, just as importantly, on you.
Keep in mind that buying a privately held company always carries with it an element of risk for the buyer. No matter how large the company is and how well established the business model may be, your privately held company is largely an unknown entity to the outside world, especially when it comes to its financials. So your personal integrity, as well as the company’s, is on the line when you present your opportunity to buyers. So be honest!
Another reality that is key: Make sure that the financials that you present are accurate. The numbers you show should provide a summary of top and bottom-line growth (three years) and projected (five years). In order to save space, it is recommended that you round your numbers in the profile letter to the thousand in your top and bottom-line summary - so $2,335,187 would become $2,335. As for accuracy, the numbers in your teaser will flow from the full documentation that you will have created and placed in your Offering Memorandum.
If you are not an accountant, you will need to hire one to adequately produce accurate, detailed financials that are recast and complete. Since the numbers in your profile letter are a summary only, your financials in the offering memorandum need to be very detailed and defendable.
If they are not, do not send out your profile letter until the offering memorandum is finalized. There is nothing more damaging to a deal than to have numbers revised after the buyer has reviewed the profile letter. Again, reducing perceived risk is the key in all your documentation but especially so with your financials. Take the time and spend the money to get them right.
Some final thoughts: Keep your profile letter to no more than two pages. Try to keep it between 200-250 words and avoid too little or too much information. In general, bullet points work much better than long paragraphs with no gaps. Remember this is summary of your 60- to 100-page offering memorandum, it is top level info and needs to be attractive to the eyes of a professional buyer who will most likely look at dozens of them the day he/she sees yours.
Finally, be very, very careful to not disclose the company name and ensure that you do not provide so much information that a well informed buyer can determine the name of your company. This is a fine line to walk, but do not disclose your businesses identity UNTIL you have a signed non-disclosure agreement in hand (NDA). If you are not working with an M&A advisor, you will need to have your attorney craft an ironclad NDA that protects you and your business from prying eyes that simply want to steal information about your business. So make sure that your teaser doesn’t provide too much detail.
Of course a buyer is going to want to have some idea of where the business is located so say something resembling, “Located in the upper mid-west, the company is one of the oldest distributors of roofing products in its market, representing more than two dozen manufacturers and capable of supplying a full range of roofing product needs.” That is general enough to give the reader an idea of location and business direction without disclosing too much.
And before sending your letter out, have someone you trust edit it. It is amazing how mistakes can slip through your own review and what a second set of eyes can pick out that you may miss after countless reviews!
Unfortunately I am only able to scratch the surface of this topic today. If you would like to learn more and even see samples of what a profile letter looks like, I recommend that you attend a Generational Equity M&A seminar. While there, after a few hours of your time, you will have a significantly better understanding of how to create all the documentation you will need to present to buyers, including the teaser.
And if you are forced to find buyers on your own, be creative as you produce your teaser and make it informative and interesting to review. As they say in showbiz: Always leave them wanting more! Make a great first impression!
Carl Doerksen is the Director of Corporate Development at Generational Equity.
© 2014 Generational Equity, LLC All Rights Reserved
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