Acquirer Profiles

Get to know the behavioral profiles of companies in the M&A arena

Sitting in a meeting room to review the first draft of my startup's acquisition agreement, I took a deep breath. I opened the document and scanned it before reading each paragraph in detail. I looked at my partner, with whom I had already conducted several acquisition transactions in our previous lives as TOTVS executives. The expression on both their faces was the same: disbelief.

We barely needed to say it, but I did. "As director of M&A I wouldn't propose this format." Not that it was wrong. What we were reading just reflected a different way of thinking about the business than what we were used to as buyers. It indicated a different buyer profile.

What are Buyer Profiles

When a company approaches another to make an acquisition, it demonstrates a set of behaviors that define its profile. Based on it, it is possible to predict some characteristics of a likely business proposal. For example, a profile that believes in long-term partnerships may be more prone to exchanging shares, another may be averse to fixed payments and try to maximize variable payments based on results (earn-out).

In this article we categorize buyer profiles into 6 groups and identify them as different animals, according to their characteristics: Bear, Shark, Eagle, Fox, Porcupine and Chameleon.

Whose profile?

I often say that a company does not acquire or merge with another company. People are the ones who do this. But when it comes to the buyer's profile, what is in conjunction is a corporate culture of mergers and acquisitions. One person involved may have some influence on decisions, but in general the deal and its negotiated conditions will reflect the way of thinking of a society. This is because an M&A deal involves the participation of different people and areas and the approval of a council. These people form a group that behaves in accordance with the corporate culture.

Below we detail the 6 profiles according to this culture, how it is reflected in a merger/acquisition strategy, the format of transactions, and the integration strategy. We also added an assessment of which company/founder profile is a good fit for this buyer profile so that you can direct the transaction to the best profiles for you and your company.

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Profile 1 - The Bear

Bear Culture

Values ​​lasting partnerships, trust, and collaboration. He believes in growing together, increasing the size of the pie, and that a smaller piece of a larger pie can be even more valuable. Join forces to conquer the market.

Bear Merger/Acquisition Strategy

It unites companies through the exchange of shares, seeking synergies and strengthening the combined business. Conducts transactions in a careful but friendly manner, in the spirit of strategic partnerships.

Transaction Format

Predominantly exchange of stock. They rarely offer relevant cash-out or earn-out, as the future opportunity lies in joint participation.

Bear Integration Strategy

Focuses on integrating operations harmoniously, respecting existing cultures. You can maintain separate operations or combine them and involve the partners of the company incorporated in the new structure. In any case, everyone's incentive model will be to seek the best results for the combined company.

Good Fit For

Entrepreneurs who value long-term partnerships, who want to continue in the business and believe in joint growth, being part of a consolidator, even if no longer in a protagonist position.

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Profile 2 - The Shark

Shark Culture

Aggressive, focused on results and rapid growth. Willing to take high risks to obtain high rewards. It prioritizes conquering the market and eliminating competition.

Tubarão Merger/Acquisition Strategy

It buys companies aggressively, almost predatorily. It can acquire multiple direct competitors to consolidate the market and quickly increase market share without fear of destroying value in its combination.

Transaction Format

Can include hostile takeovers or aggressive bids with short deadlines. They are more likely to pay cash out to have the freedom to integrate the business.

Shark Integration Strategy

Integrates quickly and aggressively, often absorbing customers and resources without major concerns about maintaining relationships or collateral damage.

Good Fit For

Companies in highly competitive markets where consolidation is inevitable. Entrepreneurs who face a shark as a direct competitor and do not have the profile or resources to become market consolidators.

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Profile 3 - The Eagle

Eagle Culture

Strategic, visionary, and focused on growing sustainably. Values ​​maintaining value and relationships. Fits parts precisely to generate synergies and reduce losses.

Eagle's Merger/Acquisition Strategy

Buys companies strategically, with a strong focus on how the acquisition can complement and strengthen the company's position in the market. Retains founders for a moderate period to ensure a smooth transition.

Transaction Format

Includes fixed payment and balanced earn outs to keep founders engaged, ensuring alignment of interests in the short and medium term.

Eagle Integration Strategy

Integrates in a balanced way, allowing founders to maintain a degree of autonomy while executing against strategic direction. Plan a smooth succession to absorb the business after the founder's inevitable departure.

Good Fit For

Entrepreneurs who wish to remain involved in the business for a period after the acquisition and who are looking for a strategic partner who will value their contribution for a few more years in order to increase the potential value of the transaction.

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Profile 4 - The Fox

Fox Culture

Smart, focused on maximizing return and extracting the maximum possible value according to your own interests. It does not hesitate to impose strict conditions to ensure objectives are met.

Fox Merger/Acquisition Strategy

Super aggressive and occasionally malicious in the terms of the deal, often squeezing the fixed value offer (cash out) and maximizing the variable percentage of the offer (earn-out). It puts pressure on founders to ensure flawless execution to extract adequate returns from the transaction.

Transaction Format

Offers with up to 100% earn out, with long terms of up to 5 years, rigorous goals and constant monitoring.

Fox Integration Strategy

Low integration, giving autonomy but limited support to founders to achieve their goals.

Good Fit For

Companies in a situation of existential risk. Founders with confidence that they can grow the business and achieve aggressive goals and are willing to stay at the helm for a few years to do so, with the possibility of significant financial reward.

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Profile 5 - The Hedgehog

Hedgehog Culture

Defensive, risk-averse and extremely cautious. Prioritizes the protection of investments and avoids proposals that could result in losses.

Hedgehog's Merger/Acquisition Strategy

Protect and reduce the risk of invested capital. Justifies the transaction with a business case and works on the negotiation so that it faithfully reflects your projections.

Transaction Format

Typically based on aggressive earn out targets and moderate valuations.

Hedgehog's Integration Strategy

Implements rigid structures to control the development of the incorporated business according to its metrics. Can even isolate business founders to avoid risks, taking responsibility for management.

Good Fit For

Solid companies that offer good conditions for growth without too much dependence on founders for execution.

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Profile 6 - The Chameleon

Chameleon Culture

Flexible and adaptable, able to adjust to market changes and transaction needs. Values ​​flexibility and the ability to change direction as needed.

Chameleon Merger/Acquisition Strategy

Aims its acquisition strategy in renewal, adaptation and an attempt to remain at the forefront. Incorporates companies that can complement their operations and quickly adjust to new conditions.

Transaction Format

Flexible transactions that can include a combination of share exchange, cash out and earn out, depending on the aspirations of the entrepreneurs with whom they negotiate, the market situation and the company.

Chameleon Integration Strategy

Flexible in approach, adjusting according to the strategic direction of the transaction and the moment. It can range from strong incorporation to maintaining the business independently.

Good Fit For

Entrepreneurs who value flexibility. Dynamic companies that navigate changing scenarios and/or diverse clients well. It can be a suitable fit for any company and founder depending on the moment.

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Choosing the right partners

Opening doors with different companies to create competition and maximize business value is a crucial strategy for the founder when the time comes. Using the different profiles in juxtaposition to each other can be interesting for conducting negotiations. However, as a founder, you want to close the deal with a company with a profile that you are a good fit for. Remember, you will most likely spend a few more years running the business together with this company. Get to know and evaluate well.

What lays ahead

One of the most requested products in our surveys with entrepreneurs is the "Buyer Profile Report." We understand that this article is just a start. Soon, we will make available for our premium subscribers a dynamic report tailored to your business, categorizing potential buyers in your sector according to these 6 profiles. Subscribe to the premium plan and get first-hand access.

[Premium Content] Examples of each Profile

In Brazil, my specific knowledge allows me to classify several potential buyers for your company according to these profiles. If you are interested in this personalized mapping, book an appointment with me to talk about my mentoring model.

But to make the understanding of profiles better settled in your head, let's look at some real international examples.