Recently a prospective client approached me for help with a business acquisition he hoped to make. The prospect had yet to identify a suitable opportunity but knew he wanted to acquire a manufacturing business. He spoke as well of forming a search partnership to make several additional acquisitions in coming years.
I had the sense that the prospect was going to speak with many accountants, bankers, and other attorneys regarding his plan, hoping that one of them might drop a suitable business opportunity onto his plate.
Over the years and using my network, I have made numerous business people, clients and others, wealthy by finding a business to buy or business model or investor or manager for them.
I told the prospect, however, not to rely on my network or the pure happenstance that any banker, accountant or other attorney would drop a deal in his lap. Unlikely to happen.
Instead, in order to build near-term and continued success in the acquisition space, I recommended that the young man plan and invest in the development and maintenance of a comprehensive "deal magnet."
What is a Deal Magnet?
A deal magnet is a network for identifying acquisition opportunities. It consists of many contacts who are strategically aligned into a singular resource for making deals.
A deal magnet once developed would have a flywheel and continued momentum and could reasonably be expected to generate a steady stream of acquisition opportunities, including some that had not been listed or shopped in any way.
The Three Steps in Developing a Deal Magnet
1. Create a database of businesses intermediaries
The first step towards developing a deal magnet is to create a database of business intermediaries throughout the relevant geographic area, and to reach out to all of them explaining what you are looking for and asking them to forward suitable opportunities. It isn't easy when you are new to the acquisitions space and have no track record to even see/get access to these listed/shopped deals. It would be important to thereafter follow up on a regular basis with all of these business intermediaries to stay top-of-mind with all of them.
2. Build relationships through frequent contact
Second, start a direct mail campaign by which you contact owners of targeted business directly, and regularly. Calling might also help. This is a numbers game but one that can pay very substantial dividends when opportunities that are not on the market are unearthed. These unlisted/unshopped opportunities can be the very best and most valuable opportunities as there is no or very little competition for these businesses.
3. Contact other professionals
A third prong might be to contact other professionals, such as bankers, accountants, and attorneys, and ask them to share acquisition opportunities. As few attorneys may have ever put a deal together, this seems to me to be less likely to happen than the first two ideas and initiatives listed above.
Creating and managing a deal magnet represents a substantial investment of time and treasure. But if you are truly serious about buying a business, or buying multiple businesses over a period of years, this is the best way to go.
I have coached many entrepreneurs in the planning, development and maintenance of "deal magnets" and seen this strategy work.
If you have questions about buying a business or any other business transactions, contact The Calkins Law Firm, Ltd. today.