Conversations are a powerful tool for David Alden in his role advising business owners on M&A strategy.
“The most challenging element of advisory work is taking on the role of being the coach — not the solution,” says Alden, group chair for Vistage Michigan. “I can't be an expert in everybody's business and situation. But what I can do is help people realize and make their own best decisions by asking the right open-ended questions.”
After spending much of his career making deals around the world at Ford Motor Co., Alden has brought his entrepreneurial skills to Vistage. He advises 33 middle-market business owners across two separate groups, digging deep to understand their personal goals and objectives.
“My goal is to help guide them to their own solutions by having them look at their own options,” Alden says.
Smart Business Dealmakers spoke with Alden about his approach to being an M&A adviser and the complexity of making deals in today’s market.
Think about your future
Good dealmaking begins with being knowledgeable about the choices in front of you, Alden says.
“It’s about understanding what is possible in your industry and your category in terms of multiples and then getting your business in shape to be sold,” Alden says. “That's the constant conversation we're having, even those that do not want to necessarily sell their business in the immediate future. By having that discussion, it drives a lot of positive processes in their own businesses that will help them long-term when it is time to sell.”
Business owners need to dig into things like operations, financing and personnel development.
“You want to have these things in shape so that somebody can walk in and see that the processes and procedures are not dependent on one or two individuals in the business,” Alden says.
If you have no intention of selling your business, this may seem like an unnecessary process. But the reality is, you just never know when an opportunity is going to come along that you just can’t afford to pass up. That, along with the emotional side of the process, makes it a wise move to be proactive in planning your future.
“Some people who built their business and have been at it a long time still don't want to let go because this is what they built. Others have an eye towards doing this as soon as they start the business. They have a five-year plan, a 10-year plan and they stick to it. With the 33 members I have, you get 33 individuals and 33 individual plans.”
Find someone to listen
The selling process often becomes even more difficult when it’s a family-owned business.
“The most complex situations are when we have family members involved in the business who are not active in the business and don't have a great understanding of how the business operates,” Alden says.
“Trying to get agreement on what might be a realistic price and what they would get out of it becomes more emotional than factual. I've had several of those and those become some of the largest challenges that our members have.”
He gives the example of two brothers who start a business and one passes away, leaving the surviving brother running the business. When it comes time to sell, the heirs of the other brother who have not been that close to the business get involved and things can get emotional.
As is often the case in moments of grief, people aren’t necessarily looking for someone to tell them what to do, Alden says. Many times, they just want someone to listen to what they’re thinking about.
“I facilitate discussions among my 15 or 16 members that have been through either the exact situation or partial elements,” he says. “We use the experience of the group to help people make better decisions by hearing different opinions and different perspectives on the same issues.”
Don’t forget about your needs
Alden recently faced a situation in which a Vistage member was a 100 percent operator, but only a 25 percent owner.
“When they sold the business, there was a liquidity event for him,” he says. “We worked hard with that individual member, who is still in his 50s, to make sure that he got the right deal so that the company would continue with the success it was already enjoying and he would get some kind of financial reward when the company that bought it rolled it up again.”
This particular owner was very concerned about the team he had built and needed someone to remind him that he had to think of his own well-being too.
“A lot of people get so wrapped up in in selling a deal that they don't spend enough time thinking about what they’re going to do next” Alden says. “There are no cut-and-dry deals these days. They all have twists and turns and there isn't just a simple playbook of how to do this. That's where I think the members that I have involved in this really learn a lot from their fellow members in terms of the thought process of what they need to be thinking about because the other fellow members are asking them the right kinds of questions.”