Ocean’s 11 is one of the most re-watchable movies of all time, in spite of its outlaw topic. In it, eleven lovable criminals join forces to take down the owner of three major Las Vegas casinos. While the movie is both absurd and enjoyable on its own, it also has one interesting parallel to the SMB buying process. In order to acquire a small business, “you’re gonna need a crew” with specialized skills to get the job done.
SMB buyers engage lawyers, accountants, financial analysts, asset valuation experts, tax experts, insurance experts, technology consultants, and others during the M&A process. Each of these professionals has a unique skill set designed to increase a buyer’s chances of success. That means acquiring a small business at a valuation that properly accounts for underlying risks and opportunities.
Going it alone is very risky. Just like George Clooney would not have succeeded in performing the incredible bank vault flip executed by 5’0 acrobat Qin Shaobo in Ocean’s 11, a buyer without a forensic accounting background shouldn’t perform their own Quality of Earnings analysis. With millions of dollars on the line, finding the expert with the right skill set is paramount.
Ultimately, running a small business requires generalist skills such as leadership, strategic vision, and people management. Buying a small business requires specialists to provide transparency to the buyer and their investors.
Assembling Great Teams
The big challenge for many buyers is finding the right people for their deal teams. Buyers with backgrounds in private equity or investment banking have a clear advantage. They already have professional connections to the experts they need. In many cases, buyers with connections will build an entire team from friends, family, and other acquaintances. When we talk to these connected buyers, the most common phrase we hear is “I don’t know what I would have done without [insert valuable connection here]”.
In many cases, buyers with connections will build an entire team from friends, family, and other acquaintances.
Graduates of top MBA programs with Entrepreneurship Through Acquisition courses, advisors, and clubs, also have an advantage. These buyers can source experts from professors and alumni that have acquired a business in the past.
Yet, buyers without close personal connections to the M&A process face steeper challenges. They typically go down one of two paths. Option one is working with the connections they do have, even if there isn’t a perfect alignment of expertise and diligence needs. Option two is performing time-consuming Google searches and making big leaps of faith. In either case, buyers end up taking on additional risk. A lack of connections can kill search funds. Buyers can fail to reveal a key element of the business during the evaluation process. In other cases, buyers succumb to frustration and end their search altogether.
Opening Up the M&A Space
This isn’t right. The success of an acquisition entrepreneur should come down to their abilities as a business owner and not the quality of their personal and professional connections. Our goal with Private Market Labs is to make sure that every entrepreneur has access to the services they need to transact in the SMB space. We’re doing this with our Service Provider Marketplace, which provides access to professionals that can assist with diligence, closing, and post-close efforts. We’re here to help every George Clooney buyer in this ecosystem find a Brad Pitt to support them. So, sign up for an account, build your team, and make forward progress in your entrepreneurial journey.