Blind Profiles: A Few Considerations
Is it just me, or are there new private equity “funds” cropping up on a weekly basis? With public and personal balance sheets awash with capital, is it any wonder we’ve got so many middle-market buyers around every corner? Luckily, it makes the market rife for some great payouts to founders, entrepreneurs and shareholders looking to sell. There are few potential sellers whose business would not be effected—most oftentimes negatively—without the use of non-disclosure and confidentiality when it comes to information exchange throughout the sales process. From the beginning, sellers’ agents begin with a typical blind profile. In many ways, the blind profile is like a miniskirt:
Long enough to cover the essentials, short enough to keep it interesting.
Anything over one page when it comes to the blind profile, in my opinion, is wholly unnecessary. The simple purpose is to snag the initial attention of the buyer and solicit a request for more information, including a completed non-disclosure agreement. A typical blind profile will include the following key components:
- Seller’s advisor, banker or agent info, including contact information.
- Brief company description. This description is typically no more than a couple of paragraphs in length and outlines the type of business, the industry, the business model and perhaps a few key business highlights and/or successes.
- Historical financials. A typical five year adjusted recast of the financials will be included with the blind profile. This will be perhaps the biggest component of the profile and the piece most likely to deter or reel-in the attention of applicable buyers.
- Projected proforma financials. Certainly many proforma financial projections are based on opinion, but in this case it can help the buyer understand expectations for the business in the coming future and is an expected component of what most blind profiles.
Not too much else can be included without giving away pertinent and revealing information on the business itself. For those regional advisors or bankers representing local firms in boutique deals, maintaining privacy can be even more difficult. Hence, maintaining a very neutral blind profile can be highly necessary.
Bait and Switch?
Having worked on both buy and sell-side mandates, we’ve seen our fair share of poorly-drafted profiles. On the buy-side, the process is part comical and part aggravating when the seller and/or the seller’s agent engages in bait and switch tactics with the blind profile. If you put lipstick on a pig, it’s still a pig.
Unfortunately, reverse engineering the business to look more desirable than reality undermines many sellers in the following ways. First, it significantly downgrades the legitimacy of the seller and his/her agent in the deal. Second, it wastes everyone’s time. When blind profiles go to the Managers of private equity funds who’re searching for a specific deals and the profile isn’t up-to-snuff, then it can be a waste of both the buyers’ and sellers’ valuable time.
As a necessary component of the deal process, the blind profile works as an effective and natural filter for potentially interested buyers and a privacy protection mechanism for information-sensitive sellers. It’s an often-overlooked, but critical component in the initial marketing outreach and pitch to potential buyers.
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