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Build it, and they will buy it


Summer is just around the corner, and that means previews for all of the summer blockbuster movies are starting to appear. My experience is that movie previews often don’t do a good job of giving a feel for what the movie is really about. I have avoided movies based on previews only to see them later on cable and find the movie wasn’t at all what I had expected. And we’ve all seen previews that make us want to run to the theater, only to be disappointed when we find that we saw all the good stuff in the preview.

How is it that a movie studio will spend years and, in some cases, hundreds of millions of dollars to create a movie and not take care to make sure the preview will give a good summary of the movie’s theme and story? This can be a costly mistake and one that I’m sure has been the difference between a profitable release and dud status for more than a few movies.

So why is an investment banker writing about movie previews? Because one of the more important steps in the process of selling a company is the marketing material used to attract potential buyers. Just like a movie preview this material needs to accurately tell the story while grabbing the interest and attention of the potential audience in a limited timeframe.

The first piece of marketing material is typically an executive summary that outlines the business in a few pages. At this point in the process, the identity of the company is kept confidential, so it is very important to accurately describe the business, its strengths, and what makes it a compelling acquisition opportunity. The point of the summary is to get potential buyers to buy a ticket to see the full show.

Potential buyers interested based on the executive summary will sign confidentiality agreements and ask for a more complete book on the company. This document is generally referred to as a confidential investment memorandum and is much more detailed than the summary. In addition to discussing the business and its strengths, this document will describe the industry environment, risks, customers and suppliers, and provide financial statements and projections in much more detail.

Together, these marketing materials are responsible for attracting potential buyers. If the information is inaccurate, misleading, or incomplete, prospective buyers might never come to the show. And if the information in the early documents proves to be exaggerated, potential buyers with oversized expectations can easily be turned off as they make it further through the process.

Making a movie preview might seem insignificant compared with the time and money invested in making the film, but it can and does affect box office receipts. Successful business owners need to realize that marketing the company for sale can have a disproportionately large impact on the value they realize from a sale. It makes sense to put as much effort into marketing material and the sales process as you put into building a great company in the first place.

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Jon Wiley

Jon Wiley is a Managing Director in the Denver office of Hunter Wise Financial Group.  Hunter Wise is a national investment banking firm providing institutional financing, merger and acquisition, divestiture and advisory services, to middle market companies in a broad range of industries. Contact Jon at jwiley@hunterwise.com or 303-833-1131.

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