MM M&A - 029: Questions Sellers Should Ask Potential Buyers

In this episode, we discuss the key questions sellers should ask potential buyers when considering a sale. Understanding a buyer's strategic goals, cultural alignment, and team integration plans is crucial for ensuring a smooth transaction and long-term success. Hosts Gina and Jeff dive deep into the due diligence process and provide sellers with a roadmap to evaluate fit beyond just price and terms.

What You’ll Learn in This Episode:

• How to assess potential buyers during management meetings
• The three critical categories of questions sellers must ask:
• Strategy: What are the buyer’s long-term goals?
• Team & Integration: What happens to the management and employees post-sale?
• Culture: How well does the buyer’s corporate environment align with the seller’s?
• How to prepare for buyer meetings and identify red flags early
• The importance of understanding a buyer’s track record with past acquisitions
• Why employment agreements and compensation plans should be negotiated early

Key Discussion Points & Notable Quotes:

Developing the Buyer List (1:00)
Colonnade Advisors carefully curates a list of potential buyers, focusing on strategic fit and long-term plans. As Gina explains:
"We are spending a lot of time at Colonnade—an awful lot of time—thinking about which companies out there could be the best fit for this seller… A good fit from size, product set, and strategy.”

She further explains why breaking buyers into categories (strategics, private equity-backed strategics, and institutional investors) helps sellers make better long-term decisions.

Understanding Buyer Motivations & Fit (4:00)
Sellers need to look beyond just financial offers. Jeff highlights the importance of knowing who you're dealing with:
"We have transaction execution experience with many of these buyers… we know who follows through on commitments and who is just going to throw out a high number to get in the mix but won’t close.”

Management Meetings & Key Questions for Buyers (7:15)
During management meetings, sellers should evaluate buyers as much as buyers evaluate them.
According to Gina:
"It's really important that it's a two-way street. The management team has the opportunity to evaluate the people across the table from them… Sometimes a management meeting goes poorly because somebody was rude. It’s important that comes out because this is a low-stress situation for buyers—they should be on their best behavior."

The Role of Private Equity vs. Strategic Buyers (9:45)
Not all buyers have the same investment horizon. Gina explains:
"If you are being acquired by a strategic that’s owned by a private equity firm, there’s going to be another exit event at some point in the future… That private equity firm bought that platform with an investment horizon of three to seven years, typically five years, so you’ll be going through this again."

Employment Agreements & Negotiation Tactics (16:50)
Some buyers delay employment agreement negotiations until the last minute, putting sellers in a tough spot. Gina warns:
"I've seen a strategy used by some buyers that absolutely infuriates me… they refuse to negotiate employment agreements for senior leadership until two weeks before close because they know they have the sellers over a barrel.”

Evaluating Cultural Fit (22:59)
Culture can make or break a deal. As Jeff notes:
"The first date here is the management meeting, and we want to prepare our clients to be ready—ask great questions and get the most information they can out of these meetings."

Gina also suggests asking buyers tough questions to see how they respond:
"One of my go-to questions at dinner—usually after the first glass of wine—is, ‘Tell me about the worst deal you’ve been involved in. What happened?’ You’ll learn a lot from their answer."

Final Thoughts:

Selecting the right buyer is about more than just the highest offer—it’s about finding a partner that aligns with the seller’s vision, values, and long-term growth strategy. This episode provides actionable insights to help sellers navigate this crucial decision-making process.