When you have been putting years of time and effort to run your company, you need to be sure you get the best value possible for all your hard work. One of the most important factor in gaining the best value is to find the right buyer. A company can vary greatly in value depending on the reason for the acquisition.
If that is the case, then it is best not to sell your company to the first person who makes an offer. Besides not having any leverage, they are unlikely to be the best buyer. There is much advantage in taking time to research into who would be the best buyer for your company. This should be done with professionals who are able to make analyses to find companies that have the best strategic fit. They need to have access to buyers across the globe. It is worth searching further afield than those that are just nearby.
What are the different sorts of buyers?
There are various types of buyers that will buy a business, for various reasons. Here we will look at some of these.
Suppliers
A supplier buys a company in order to get access to the clients. This is vertical integration. It means that they have control over a larger sector of the distribution chain. This is advantageous as the company has a more reliable market for its goods.
Clients
In reverse clients can buy their suppliers. This is vertical integration in the opposite direction. In this case the client is able to have a greater influence over the cost and availability of supplies. It is also able to tailor make the supplies for the use they need.
A company in a different geographical location
Buyers could be interested in a company because it is in a different geographical area to themselves. This means that they can then expand into this new market. It may also include expansion into a different country. Where there are cultural differences buying a local company means the business is already adapted to the locality.
Private equity
Private equity can account for almost 25% of acquisitions, so it is worth taking into consideration. They will normally be looking for sectors where there is a lot of growth and where their investment will get a good return. If they are already taking interest in similar businesses, then it is worth pursuing the idea of them consolidating through the acquisition of your business.
Similar businesses
Similar businesses to your own can prove to create good synergies with your business. So, your competitors may be just the business that would be interested in buying. This could increase their market share and reduce production costs.
Complimentary businesses
There could also be other businesses that could benefit with diversifying their products, so it is worth looking further afield than just similar businesses.
How do you find the Best Buyer?
One of the first things that needs to be prepared on selling your company will be the information memorandum. This will have details about the company and its sector. This can have lots of good facts about the history of the company, but more importantly it should show the potential of the company. A good advisor will look at how the company can be of value to potential investors.
Spread the net wide to find buyers. Look at why someone would want to buy. Work out synergies, discuss possibilities, and present the strengths and value your company would give. Also, make sure you don’t just go with the first good offer, actively seek alternatives.
In short the best buyer is not always the one who is the most obvious. They are probably not the one who comes knocking at your door. Make sure you get experienced advisors who can help you look for the best buyer further afield.
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- The World Economic Forum in Davos: Implications for Mergers and Acquisitions - January 24, 2025
