Positioning, not process, is what drives the outcome

Most M&A advice gets the priority backwards. Here’s what I’ve learned from our $4.5 billion in transactions.

If you talk to most M&A advisors about what drives a great outcome, you’ll hear about process. Run a tight auction. Bring in the right buyer list. Reach 4,000+ private equity firms. Manage diligence. Negotiate hard on the LOI. Get to close.

That’s all real, and it all matters. But after 30 years and 100+ deals, I’ve come to believe that process is maybe the third most important thing. Maybe the fourth.

The most important thing, by a wide margin, is positioning.

Positioning is the answer to a single question: when a buyer reads about your company for the first time, what story are they reading? Not what facts. What story.

Founders almost always think the answer to that question is obvious. It’s their company. They’ve lived it for ten or twenty years. Of course the story is obvious.

It isn’t. Or rather, it’s obvious to them in a way that doesn’t translate. The version in their head is built from a thousand decisions, customer conversations, near-death moments, bets that paid off, bets that didn’t. The version a buyer encounters is a 40-page document and a one-hour management presentation. Those are very different artifacts.

Here’s the part I want founders to understand. The outreach messaging and the confidential information memorandum (CIM), the main marketing document in a sale process, is not an information document. It is a story document. The information matters. Buyers will pull every number apart in diligence. But the CIM’s job is to make a buyer believe a particular thing about your company before they get to the diligence. Once they get to diligence, they’re either looking for confirmation of what they already believe or looking for ways out. The story you set up in the CIM is what they’re confirming or escaping.

I’ll give you a real example.

A few years ago we worked with a good-sized consumer brand. Healthy margins, growing, founder-led. If you described it on a list of attributes, it looked like fifty other consumer brands a buyer might see in any given quarter.

The instinct, and what a lot of advisors would have done, was to lead with the financials and the category. “Profitable consumer brand, strong growing revenue, margins above category average.”

That’s accurate. It’s also a reason to politely pass. Because the implicit story is “another decent brand.”

What we actually did was build the document around a different thesis. The company had spent five years building a direct relationship with a customer segment that nobody else in the category could reach efficiently. The financials were the proof, not the headline. The headline was the customer base and the moat around it. Everything in the document, the way we described the business, the order we presented things, the data we chose to include, the data we chose to leave for diligence, was in service of that thesis.

The buyers who responded weren’t shopping for “another decent brand.” They were shopping for access to that customer segment. And once a buyer has decided what your company is for, the price conversation gets a lot easier.

The deal closed at a multiple meaningfully above what the financial profile alone would have justified. Same numbers. Different story. Prior to working with us, they had an offer for $14mm that fell apart in diligence. They engaged us. We told the right story about the brand and their consumer. We created competition and sold the company for $22mm.

This is why I think positioning beats process. A brilliantly run process around bad positioning gets you a market-clearing price for what buyers think you are. Decent process around great positioning gets you a premium price for what buyers should think you are. And competition or perceived competition makes a difference.

A few things I’ve learned about positioning that I’d offer to any founder thinking about a transaction in the next 12 to 36 months:

Your positioning needs to be true.

This isn’t spin. It isn’t dressing up a mediocre business as a great one. Buyers are sophisticated, diligence is thorough, and a story that doesn’t survive contact with the data will hurt you more than a plainer story would have. The question isn’t “what story can we tell.” It’s “what is the truest, most strategically significant story about this business, and are we telling it clearly.” A typical Wall St. phrase is a pig in lipstick is still a pig.

The right story is usually not the one you’ve been telling yourself.

Founders are, in my experience, often the worst-positioned people to articulate their own company’s strategic value. You’ve spent years inside it. The things you take for granted are often the things that matter most to a buyer. A good advisor’s first job is to find those things. What you think is important, likely isn’t what a buyer thinks is important.

Buyers are not all looking for the same thing.

A strategic acquirer looking for capability and a financial sponsor looking for a platform investment or tuck-in acquisition will read the same CIM and value it differently. Part of positioning is knowing which buyer you’re really writing for, and being honest about whether one document can serve both. It also means, the initial story told to the prospective buyer needs to be tailored to them.

The story is set before the process starts.

By the time a buyer is in your data room, the major contours of how they’re thinking about your business are already locked in. You can lose value in diligence. It is much harder to gain it back. This is why the months of work before a process matters so much, and why “we’ll figure it out when we go to market” is usually expensive and not advised.

Positioning is the part of the deal that requires the most judgment and the least process.

It’s the hardest thing for AI to do well, and the hardest thing to outsource to a junior banker. It requires sitting with a business, understanding it, finding the angle, and having the experience to know which angles will land with which buyers. It is also having relationships with buyers and knowing where the market is, and what it is looking to acquire. This is the part of the work I find most interesting, and I think it’s where the actual value of an advisor shows up.

A lot of M&A writing focuses on the mechanics. NDAs, LOIs, reps and warranties, earnouts, working capital pegs. All of that matters. I’ll write about a lot of it.

But if you only had time to get one thing right before a sale, I’d tell you to get the story right. The mechanics will follow.

If you’re a founder or CEO navigating the world of M&A, eGateway’s M&A advisory practice works with businesses on sell-side, buy-side, and pre-transaction strategic work. You can reach me at sancrant@egatewaycapital.com.