Exit – Series 3, episode 4 – Questions and answers

In: Exit Sitcom / 2 comments

7 Dec 2010

Surprise – a process I thought was finished for the other party’s lack of interest is reopened. Such a process is like a carousel ride with many loops.

So we saw each other, we liked each other, we declared our mutual interest, we signed an NDA, now let’s get to know each other better.

I received a list of questions just as anyone would expect to receive: mainly financial questions (history, forecast, sources of revenue, costs) but also questions related to the product (features, technology), to the market, to opportunities, to risks, to structure, shareholdings. All in all, a potential buyer needs to be able to have a complete picture of the company after the answer to this document. Let’s look at it a little from the point of view of the buyer: he has no idea what he’s buying. He has no way of knowing your strengths and weaknesses. The more evasively you answer him, thinking – “I am the coolest company there is so why is this guy asking me so many questions, isn’t that clear?” the more reluctant the (now only potential) buyer will be and the lower the evaluation he will offer. On the other hand, the more you tell a potential competitor, the worse it could get if you don’t struck a deal – and at this moment there is no indication if the two levels of expectations are close enough or not. Whenever I entered this kind of games, I made an initial assessment of the probability of completion. In general I was right; a few times I made a mistake thinking the process will be finalized. Once I travelled to the States convinced I was going to return with a contract; I gave tons of information and… all for nothing. But such is life – if you don’t say what you are good at, people can’t appreciate your real value.

OK, after the answer I thought was very detailed, a whole month of additional questions followed – which is again obvious if you think that these people are preparing to pay a ton of money on something they have no knowledge of. Somehow this is the moment when you see if they are serious or not from the level of interest that drives them to understand the phenomenon.

An interesting element in this process is that very often their questions from the outside come to shed light on many of your internal situations and issues. It forces you to make reports you have ignored, to write things you were trying to hide from yourself. By answering that set of questions you are practically rebuilding a business plan, this time with a gun to your head. For some reason, as strange as it might seem, this is the correct way to build a Business Plan.

Note: This entire series is inspired from reality but it is not a word-for-word translation of it. I adapted all of the events/stages/documents/facts that had to do with the transaction in such a way as to a) not violate confidentiality and b) be as useful as possible to entrepreneurs that haven’t gone through something like this yet.

(English version by Teodora Popescu)

Original Romanian version

Exit – Seria 3, ep. 4 – Intrebari si raspunsuri

Surpriza – un proces pe care l-am crezut terminat prin lipsa de interes celuilalt se redeschide. Un astfel de proces e un carusel cu multe bucle.

Deci ne-am vazut, ne-am placut, ne-am declarat, am semnat NDA, acum sa ne cunoastem mai bine.

Am primit o lista de intrebari asa cum ar trebui sa se astepte oricine sa primeasca: in principal financiare (istoric, forecast, surse de venit, costuri), dar si legate de produs (features, tehnologie), de piata, oportunitati, riscuri, structura, actionariat. Una peste alta un potential cumparator trebuie sa-si poata face o impresie destul de completa despre companie dupa raspunsul la acest document. Hai sa ne uitam un pic si din punctul de vedere al cumparatorului: el habar nu are ce cumpara. Nu are cum sa stie punctele tale tari si nici pe cele slabe. Cu cat ii raspunzi mai in doi peri, pe principiul “eu sunt cea mai tare firma, ce draq ma tot intreaba asta atat de multe, nu e clar?” cu atat cumparatorul (deocamdata doar potential) va fi mai reticent si iti va oferi o evaluare mai mica. Pe de alta parte cu cat ii spui mai multe unui potential competitor, cu atat ar putea fi mai rau daca nu se inchide dealul – iar la momentul asta nu ai nici o indicatie daca cele doua niveluri de asteptare sunt suficient de aproape sau nu. Eu de cate ori am intrat in astfel de jocuri am facut o evaluare initiala legata de probabilitatea finalizarii. In general am avut dreptate, am si gresit de cateva ori crezand ca se va finaliza. Odata am zburat pana in state convins fiind ca ma intorc cu un contract de acolo, am dat o gramada de informatii si… teapa. Dar asa e viata – daca nu spui unde esti bun, nu te poate lumea aprecia la adevarata valoare.

OK, dupa raspunsul pe care eu l-am crezut superdetaliat, urmeaza inca o luna de intrebari suplimentare – firesc, daca stai sa te gandesti din nou ca oamenii se pregatesc sa dea o tona de bani pe ceva ce nu cunosc deloc. Cumva e momentul in care ii vezi daca sunt seriosi sau nu dupa nivelul de interes cu care se concentreaza la intelegerea fenomenului.

Un element interesant in acest proces este ca de foarte multe ori, intrebarile lor din afara vin sa-ti lumineze multe probleme si situatii. Te obliga sa faci rapoarte pe care le-ai ignorat, sa scrii lucruri pe care ai incercat sa ti le ascunzi tu insuti. Raspunzand la acel set de intrebari practic refaci un business plan, de data aceasta cu pistolul la tampla. Dintr-un motiv sau altul, oricat de ciudat ar suna, acesta este modelul corect de constructie al unui Business Plan.

Nota: Tot acest serial este inspirat din realitate dar nu este o traducere “mot-a-mot” a acesteia. Am adaptat toate evenimentele/etapele/documentele/faptele tranzactiei astfel incat ele a) sa nu violeze confidentialitatea fenomenului si b) sa fie cat mai utile antreprenorilor care nu au trecut prin asa ceva inca.

Comments

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Radu Vilceanu

December 7th, 2010 at 11:49 am

Salut,

Nice post, m-a lovit exact pe specific, intr-un tocmai trec printr-un fenomen similar. Nu de exit total, dar pe acolo. Si cred ca e complexa dilema de a-ti expune strong points pe masa si strategii doar ca buyerul sa le poata prinde in evaluare. Exista intotdeauna riscul ca buyerul sa cumpere ceva mai mic, la care sa ataseze viziunea ta 😉 Dar d-aia e fun discutia, i guess.

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