Should I Speak With A PEO Buyer If I’m Not Ready To Sell?
Having a conversation with a prospective suitor requires no commitment and the time could be very valuable for market insight and process perspective. That being said, the market is currently flooded with buyers within the PEO space. PEO owners are getting solicited right and left for conversations by potential buyers. Having a conversation with a potential buyer, even when a PEO is not ready to sell, can prove valuable. The key is to have these conversations with the right people.
The Right Buyer Conversation
So, how do you determine who the right people are to speak with? From my experience, any buyer who is appropriately funded for your size of acquisition, whom possesses knowledge on the market, and deal process, and whom is willing to spend time with you even though you aren’t on the market are good indicators. For example, I have spoken with a lot of PEOs that weren’t in the market, but were curious about the market, deal mechanics and processes, etc. Even though I knew the calls would likely not lead to material action, I spent the time with these PEO owners to provide insight. From my perspective, if they come away from the call with a greater knowledge of their options, they benefit. Could some of these conversations materialize into deals in the future? Sure. But that is not the driver behind why I take these calls. I take these calls and educate the person on the other side of the phone because it is good for our industry. It is good for the owner. It is good for their PEO and their employees. The stronger our industry becomes, the more lasting our model is in play and the greater we can impact business in the United States.
Common Questions and Insight Into What to Ask
Can you guess the most common question PEO owners ask on these types of calls? You guessed it, “what are the multiples.” Of course that is going to be a common question, but don’t sell yourself short. Understanding the deal process, LOIs, Due Diligence, Purchase Agreements, Reps & Warranties, post-acquisition strategy, investment horizon, etc. is equally if not more important when entertaining a potential suitor, now or in the future. There are plenty of buyers in today’s market that will throw up some big numbers, but what happens to your PEO, your people, your clients, and your legacy post-acquisition?
Understanding the variables in the equation allows a PEO owner to make appropriate decisions. I have met with thousands of business owners, and I have always stated that by and large, business owners make good decisions with the information that they have. The lack that I have seen is that business owners don’t always understand the necessary variables in the equation to make the best decision. Therefore, whether you are looking to sell today or in ten years, it is advisable that you understand the variables within PEO M&A so that if and when you decide to make a move, you are prepared.
Identifying the right people to speak with is key. NAPEO does a good job with panels of experts at their events. They also provide insight into these topics within the PEO Insider publication. Identify whom you feel would be a good fit to have a confidential conversation with and then reach out to see if they will give you some time. If you’d like to speak with me, shoot me an email. I’ll make time to chat with you, with no hidden agenda. You can also find a lot of articles on this site by searching M&A. Best of luck closing out the 2021 year and I wish you a prosperous 2022!
Rob Comeau is the CEO of Business Resource Center, Inc. and the Founder of NPG. He is a frequent contributor on the subject of PEO M&A and has provided insight via NPG, NAPEO events as a speaker, and a contributing Author to PEO Insider.