M&A Targeting: Tips for a Good Teaser
A well-written teaser is important in the M&A process. It keeps the Buyer’s interest and can facilitate continuing the steps to a final deal. Here are some tips for writing a good teaser:
Keep it short and sweet
Brevity is the soul of a well-written teaser, so keep it to one page. The reader needs to quickly understand what the company does. The teaser doesn’t need to delve into details; that’s what the offering document is for. The teaser just needs to impart the basics.
Get to the point! The teaser should only provide enough information to spark the Buyer’s interest. Don’t waste time reconstructing the development of your industry or trying to impress the reader with your encyclopedic knowledge of this or that. Get to the salient points. Write it so that your mother can understand it.
Buyer isn’t a “black box” that automatically and immediately processes a huge amount of data. Buyer is a person or a group of people who need time to process that data. Providing an overload of data will most likely result in Buyer not even bothering to wade through it; he has tasks he can do that require less effort!
Include high-level financial info only
In the spirit of brevity, the only financials a teaser needs are revenue and earnings before interest, taxes, depreciation, and amortization (EBITDA). (If a company has an excess of add backs, the teaser should use adjusted EBITDA.) Some industries or situations may require slightly more financial information, such as gross profit of EBIT or other specific statistics (number of customers, units sold, and so on).
A teaser should have three to five years of historical financial recap plus three to five years of projections. For ease of use, the teaser’s income statement should also show expenses as a percent of revenue.
Don’t go overboard. Err on the side of keeping it simple. If the statistic doesn’t add anything, don’t put it in the teaser.
Tout key selling points
These selling points are the key strengths of the business. Companies have certain key discrete value propositions that differ from company to company and from industry to industry. Here are some examples:
Proprietary relationships with vendors: If a company is the only company (or one of a limited few) that can buy from a certain vendor, that’s a selling point you can trumpet in the teaser.
Nature of customer relationships: For some Buyers, acquiring companies with Fortune 500 relationships is a main consideration. For others, selling to consumers or middle market companies is the key aspect.
Average sale size: Some Buyers want to acquire companies that make large sales. The larger the average sale size, the faster/more easily the company can grow.
Recurring revenue: Similar to average sale size, the holy grail of recurring revenue (revenue that occurs over and over again after making the initial sale; think of your cellphone bill) helps a company grow. A company doesn’t need to have 100 percent recurring revenue; the more the better, of course, but any amount of recurring revenue is worth mentioning in the teaser.
Revenue growth: A company with growing top-line revenue usually has growing bottom-line profits.
Profitability: The only thing better than a highly profitable company is a highly profitable company that’s growing.
Proprietary whatever: If the company has proprietary software or processes — something that the competitors don’t have — that becomes a potential selling point.
The items in the list are just some examples. The teaser should highlight whatever makes the company special and different.