When the time comes and as a business owner you are considering your exit options, you may be wondering where a buyer for your business is going to come from.
Either through good fortune or succession planning, there could be the perfect buyer in waiting. For example this could be:
- Second tier management who wish to under a management buy-out; or
- The next generation of family members are willing and able to take on ownership and the running of the business; or
- A direct approach is received from a potential buyer or financial investor of your business.
However, this is not always the case, and many of our clients approach us saying they are looking to exit but have no idea who a likely buyer could be.
When should you begin the process of finding a buyer for your business?
The earlier this thought process starts the better, such that we can assist in ‘positioning’ the business to maximise value and enhance the attractiveness of the business to would-be suitors.
How do you find potential buyers for your organisation?
Selling a business is a very different process from selling other major assets such as a house.
You can’t put a ‘for sale’ sign up and wait for any expressions of interest, as there is likely to be a desire to keep the sales process confidential amongst staff, suppliers, customers and competitors.
Instead, our approach is to be proactive in the search for a buyer, targeting and approaching a small number of identified parties who we (collectively) believe have a genuine strategic interest in an acquisition.
What is your process of finding of identifying the 'right' buyer?
To enable us to identify the ‘right’ strategic buyer, we first need to understand a client’s business in more detail. As with most things in life, a well-thought-out strategy will most likely deliver optimum results.
Assuming we have identified the key value drivers in a client’s business, under a disposal lead-advisory assignment, we would typically follow the below process:
Map the market
Our dedicated research team would map the sector and market your business operates within to identify who are the key strategic acquirers with the financial resource to complete a potential acquisition, and who ideally have a history of acquisitions in the sector.
This would involve a detailed review of the underlying accounts of the company and utilising our specialist software and research tools that track merger & acquisition transactions.
Sometimes the potential buyers identified are direct competitors looking to consolidate and grow their market share.
Other times, the potential buyers operate within different sub-sections of the market and are looking to diversify by acquiring business with complementary service offerings.
This is why it’s important to map the entire market, to ensure viable buyers are not inadvertently overlooked.
Shortlist potential buyers
From our research, we would create a shortlist of potential buyers to approach with our client’s consent.
Typically, this would be in the region of 10 - 20 potential buyers, however, every assignment is different, and we would tailor our approach based on the outputs of our research.
Recently, we have had good success on transactions targeting only the top 1 or 2 most likely strategic buyers in the first instance and presenting them with an ‘off-market’ opportunity.
We have found that this approach focuses the potential buyer’s attention, with them knowing they need to move quickly and put a good offer forward, otherwise the wider market will be tested.
Anonymised approach
Once the short-list of buyers is agreed upon, we would approach the key decision makers in the business with an anonymised one-page document setting out some headline information about what the business does and providing summary financial results.
At this stage, the name of the business remains unknown to maintain confidentiality in the process until a non-disclosure agreement has been signed.
Full sales documentation
Upon confirmation of interest in the opportunity and receipt of a signed non-disclosure agreement, full sales particulars would be shared with the interested party.
From here, we would collate and issue (where relevant) interested parties requests for further information, facilitate and attend physical meetings between the parties, and help our client to benchmark, enhance and negotiate the offers received.
How can MHA help?
We regularly work with clients who are planning a number of years ahead for the eventual disposal of their business.
If you believe that we could help you with this process, including understanding your own value drivers and identifying potentially interested parties, please don’t hesitate to contact us.
