How Industry Experts Offer an Edge in M&A Analysis: True authorities on a market and its competitors are hard to find. But it’s worth seeking them out and using their take on a target industry in reaching the acquisitiondecision.

Unlike traditional market researchers, we are not interested in statistical sampling or capturing a representative population. I’ve found that 90% of the people in any given industry don’t take the time to observe, listen, learn, and formulate an opinion about what’s really going on around them. They just don’t have an informed perspective. Should we listen to everyone’s opinion to ensure we have a representative sample? No! We are not doing consumer research to find the most popular opinions; we are trying to assess the strategic reality of the market and the competitive situation. Do we ignore 90% of the people in the industry? Yes! We are only interested in the knowledge and wisdom of the 10% who are “industry experts.” Industry experts are people whose experience and observations make them uniquely qualified to offer perspective about the marketplace. They are industry veterans who love their job. They can be found within every organizational group that interacts with the target company – customers, competitors, channels, and strategic suppliers. It doesn’t matter whether industry experts work for a customer, a competitor, or a supplier. We seek to uncover the truth about what’s really happening in the marketplace. We are searching for recurring ideas and observations among industry experts. Each of them might be seeing the world from a different angle, but ultimately, when everything is pieced together, they’re describing the same realities of the marketplace. Who’s the Industry Expert at Competitors? Each functional area has an industry expert: sales, marketing, production, technology, and executive. Large companies tend to have senior managers who are too far removed from what’s happening in the marketplace. They rely on middle managers to direct information upward. So it makes more sense to talk with middle management, including sales managers, marketing managers, product managers, and R&D managers. On the other hand, small companies tend to have senior managers who are well informed and talk with other industry experts regularly. Their most valued sources will usually be president, general manager, vice president of sales and & marketing, and vice president of R&D. Who’s the Industry Expert at Strategic Suppliers? The sales manager and technical manager. It’s their job to know the customer’s business, which in this case is the target company and its competitors. Who’s the Industry Expert at Customers and Channels? It’s the manager whose job performance depends on the target company’s products/services. *For OEM business-to-business, the expert is the design engineer or process engineer. *For retail, the expert is the category manager. *For distributors, the expert is the sales manager. How to Find These Industry Experts Always ask the target company’s management for names of key people in the industry. Every manager should know at least a few industry experts, whether they be customers, competitors, channels, or strategic suppliers. These contacts should be enough to get the ball rolling. With every person you meet, regardless of where they work or what they do, ask: “Who else in this industry seems to be pretty knowledgeable?” Collect as many contact names as possible. If you still lack contact names for a specific firm, call their general number. In small-to-medium-sized companies, the receptionist will know the organization’s key executives and can help you find the right person. In large conglomerates, the corporate operator can direct you to customer service, technical support, or a division operator. It might take a couple of phone calls to network through the organization and track down the right people. Just explain who you are and the purpose of your call, and most people will attempt to send you in the right direction. Your most valued source for networking and identifying industry experts will actually come from industry experts you’ve already interviewed. Every industry expert knows other well-informed people in the business – they didn’t become experts by keeping to themselves. Secrets to Getting Industry Experts to Share All Industry experts have a wealth of proprietary information. This section is dedicated to teaching you how to get them to share everything they know. Getting industry experts to share information depends on how well you: 1. Understand what motivates them. 2. Use voice mail to make an introduction. 3. Establish credibility within two minutes. 4. Ask questions without sounding like a survey. Understand What Motivates Industry Experts How do we get industry experts to share everything they know? The secret is to understand what motivates them. Industry experts love their job. They know a lot of people in the industry and are usually well known by others. Collectively, they represent roughly 5% of the people in the industry but they possess 95% of the relevant knowledge we seek. However, they are busy people. They don’t have time to write articles for the public, nor do they have time for trivial surveys by uninformed market researchers. Does that mean they don’t share information? Absolutely not! They are a truckload of great information, if you use the proper approach. The secret to getting them to share what they know is to satisfy the “what’s in it for me?” Most people become industry experts by conversing and by learning from others. Industry experts have curiosity. They have a desire for more understanding. They have a desire to confirm their expertise. If you can satisfy just one of these needs, they will engage in a dialogue when given the opportunity. Industry experts enjoy sharing their perspectives with a non-threatening person who has credibility and knowledge of the subject. Before you talk to industry experts, think about their frame of reference. What are they likely to be most informed about? What could they learn from you that’s worth their time? Tailor your conversation to fit their interests and area of expertise. What motive does a customer have for sharing information? The opportunity to voice their opinion with an independent analyst who has the power to make key managers at the supplier listen. What motive does a competitor, channel, or strategic supplier have for sharing information? The opportunity to exchange information and learn new market insight from a knowledgeable, unbiased research analyst. And the opportunity to get affirmation of their expertise! Use Voice Mail to Make an Introduction One of the best secrets to establishing a rapport is to leave an enticing message whenever you reach someone’s voice mail. Your message should briefly explain who you are, why you’re calling, and what they will gain from the conversation. This sets the stage for a smooth and comfortable introduction when you actually reach them. They won’t be caught off guard, they’ll recognize your voice, and they’ll have a general idea about the purpose of your call. An enticing voice mail might sound like this: “Hi, Jack? This is Tom Austin. I understand you’re the vice president of marketing. John Smith suggested that it might be mutually beneficial for us to talk. I’m a senior analyst at The Business Research Group in downtown Minneapolis. For the past three weeks I’ve been engaging in a dialogue with two or three executives from each major manufacturer – talking about hot issues, trends, challenges, and market estimates. I wanted to introduce myself and see if we could have a mutually beneficial exchange of ideas and observations about what’s happening in the market. In fact, I’ve got some good insight I’d like to share. I wonder if you and I are seeing the same things in the marketplace. I have no problem sharing my findings with you – just as a professional courtesy. When you have a minute, please give me a call. I’m in downtown Minneapolis at 612-926-5522. Talk to you soon.” Establish Credibility Within Two Minutes Establishing credibility within the first two minutes greatly impacts how much time an industry expert will spend talking with you and the quality of the information they share. Always introduce yourself in such a way that lets the other person easily recognize what they will gain from talking with you. Take time to explain how your call fits into the overall scope of the research study. This means understanding the other person’s frame of reference, area of expertise, and potential motives for sharing information with you. There are several ways to quickly establish credibility, depending on your audience: * Be referred by someone the expert knows and respects. * Mention that you’ve already gained some interesting insight through conversations with his or her counterpart at other companies. * Acknowledge the person’s name and title prior to beginning an in-depth conversation. * Share knowledge that the expert will find relevant. * When talking with competitors, mention that you’ve spoken to some of their largest customers and have some interesting things to share. *Mention that you are only listening to the range of opinions people have, not looking for the individual opinions of specific people. *Be confident, but never sound slick and polished. *Be natural, human, and humble. *Display a fair degree of market understanding so that the expert feels like he or she is talking to an equal; the expert doesn’t want to provide free tutorials. *If you sense that the person is in the middle of something, acknowledge that he or she sounds busy, briefly state the reason for your call, and ask when you can reach him or her at a better time. * Realize that the introduction is the most important part of the entire conversation; talk slower than you would normally talk in person. * Always start with non-controversial questions that the expert can easily answer. This sets a positive tone for you to establish a good rapport. When describing the research study to potential interview participants, always describe it in a way that is neutral and non-threatening. Although the research is ultimately used to determine whether to buy a target company, sharing that purpose will only make your job more difficult. The easiest explanation for the purpose of the study is that you are performing a updated analysis of the industry for an existing supplier. Position yourself as gathering a significant amount of good market insight, but that it’s really only an affirmation of what most people already suspect. Never hint that the information might be important for strategic decisionmaking. Here is an introduction I use with sales managers at competitors of a target company: “Hi, Mike? This is Tom Austin. I got your name from John Smith, the plant manager at (Customer) Inc. He spoke pretty highly of you and told me you might be a good person to talk with. I understand you’re the sales manager… is that right? (listen) I’m a senior market analyst at The Business Research Group in downtown Minneapolis and I’ve spent the last two weeks talking with key executives in the (widget) industry, understanding their perspectives about key challenges, how their needs are changing, and the market’s outlook. John thought you might appreciate a dialogue, or an exchange of ideas and observations, about what’s happening in this market. It seems like a lot of people are considering switching to next-generation alpha products, but I’m not really sure what to believe… I’ve heard a lot of interesting opinions. So I just wanted to introduce myself and see if maybe we could compare ideas and observations. In fact, I’d be glad to share my findings when complete… as a professional courtesy – my way of saying thanks. Am I catching you at a bad time?” This opening introduction succeeds 90% of the time. When it fails, it’s usually because you haven’t actually reached an industry expert – in other words, the person doesn’t have an informed opinion. Rather than risk looking stupid, the person declines the opportunity to talk. Occasionally, an industry expert will decline to talk because you’ve hit a “nerve” – in other words, the subject is of great strategic importance and the person is in the midst of making some critical decisions. But even in these cases, due to the importance of the subject and the expert’s desire to be well informed, the person will use discretion and still share his or her opinions if it means getting good feedback from an independent analyst. Just remember this: If an individual is unwilling to share information with you, it’s likely that he or she is not an industry expert. People only become industry experts in the first place by learning to share information with their colleagues. Those who are unwilling to openly share information are usually not on the receiving end of information, and thus not always well informed. Ask Questions Without Sounding Like a Survey It’s not an interview. It’s a focused, fact-finding conversation. You are engaging in a focused yet easy-going conversation that revolves around exchanging opinions and observations. Approaching industry experts from a position of knowledge while recognizing their expertise brings out the “professor” in them. People love sharing their opinions with someone whose motives they trust, especially if they feel they can learn something from the conversation. The key to getting information is sharing information. To ensure that you don’t sound like a survey, thoroughly educate yourself on the issues. Be willing to share the range of opinions you’ve heard. It gives the interview participant “food for thought” and helps stimulate the conversation.