M&A: How Buyers Think
What Makes a Good Fit?
Our course, The Basic “How-To” of Becoming a Business Broker”, teaches how to Value businesses.
Become a Professional Business Broker…After some searching, we found a business that provided web sites, social media marketing and SEO optimization to the legal community. This provider’s clients were mostly small and mid-size law firms. As the network security company’s existing security offerings were directed at small and mid-size healthcare providers (large medical groups and hospitals – like large law firms – have their own in-house security teams), the target company’s client list was deemed ideal for the security company. As an added benefit, the security company would be able to offer websites, social media and SEO to its existing healthcare client base and a deal was done!
Consider This…A business owner thinking about selling could – theoretically – do this him- or herself. But why would they? First, the work necessary to prepare a business for sale, the time required to develop the marketing program and materials, the need to approach competitors and the fallout from THAT process – to say nothing of valuing their business and negotiating with any potential buyers – all takes time away from running their business. And the more time away from the controls, the more likely the business will lose value. But any business owner thinking of selling their own business to a strategic acquirer should think about this, first: Confidentiality
Management in the TrenchesMost strategic acquirers will want the sellers to stay with the business for some period of time – and usually longer than a brief transition period. And sellers need to know this. It would not be unusual for the seller to be obligated by the purchase agreement to continue to run his company – now a division of the acquirer – for several years. A seller could conceivably benefit in such an instance through an earn out – a way for the seller to actually realize greater proceeds than a straight sale in which he heads of into the sunset 10 days after closing. Professional business brokers – as part of a professional team assisting the seller – can explain and help structure such a deal. And, if you think about that scenario, you can see more clearly why confidentiality would be important to both buyer and seller.
The Bottom LineIf you’re a business broker working for a client to find a buyer for his or her business, what businesses would benefit by acquiring your client’s business. We had a client that provided fire suppression inspections for public facilities that were required to have such inspections performed – and, if the inspection found any flaws, repaired – annually. We found the ideal buyer: a company that designed, built and installed fire suppression systems in hotels, convention centers and the like. A perfect strategic fit. If you’re a business owner thinking of selling, find a professional business broker that understands not only the wisdom of strategic acquisitions but also the necessity of confidentiality. If you need help finding one, contact me. If there is a broker near you that has completed our training course – or one that specializes in your industry – we’ll connect you.
Our course, The Basic “How-To” of Becoming a Business Broker”, teaches how to become a professional business broker.