The Best Buyer for your Business

When a business owner is asked who the most likely buyer is for their business, they will typically have a good idea of the most likely candidates. This normally fits one of the following profiles: i) an outlying competitor who can’t access their market, client base, or lacks certain proprietary differentiators; ii) a strategic buyer who would love to acquire their technology, intellectual property, customer base, team, or maybe their reputation; or iii) the private equity group that has been calling on them and has a track record in their industry, or maybe even; iv) the long-time employee/general manager in their company who, with the right financial backing, could take over the business.

When a business owner has a good feel for the best potential buyers, it can be productive for the sale process. After all, the business owner understands the unique characteristics of their business and industry better than anyone. This is critical intelligence that should not be overlooked.

However, if we are hired to represent a business owner and manage the sale of their company, we prefer the owner to first keep this information to themselves while we conduct our independent research and then compare notes on which prospective buyers made it to our shortlist. In the best circumstances, we have a highly collaborative process with our client throughout the planning and preparation process, conducting research, sharing our ideas, best practices and experience to plan for the best outcome.

In addition to those strategic companies that we know from previous transactions, we will research industry databases, trade shows, proprietary databases, news, articles, publications and research online. We will also search recent transactions in their industry and find out who has been actively buying companies and determine price and terms they have been paying.

In a collaborative process with our client, we then determine the ideal profile and characteristics of an ideal buyer and rate each of our prospective buyer candidates according to that profile. This also helps to further expand research into other prospective buyers.

Once we have run this process for the full list of prospective buyers, the next step is to flag every company from the list that represents a material threat to their business if they were to find out about the potential sale. It is critical to consider whether each company should be a prospective buyer and if yes, how we should contact them, when we should contact them and what information we should share with them at what stage in the process.

The result should be a logical plan, approved by our client, with a diverse range of prospective buyers, with which we can plan a unique marketing approach to each prospective buyer.

Note that when contact is made to any of these prospects, it should never include our client company’s identity, but instead include summary information only, describing the type and profile of the company that is available for acquisition. Only after the prospective buyer has signed a confidentiality and non-disclosure agreement, should they learn the identity of the company that is considering selling.

In all likelihood, the buyer who ends up acquiring the company (paying the highest purchase price and best terms), was probably not even on our client’s preliminary shortlist. We haven’t tracked this data, but it would certainly be less than half the time that the best buyer was mentioned in early discussions. While it makes sense to start research with the most likely and obvious prospects, it would be a mistake to stop there. There is no risk in detailed planning and deliberation behind closed doors.

As with most important decisions in life, a thing worth doing, is worth doing right. To maximize confidentiality, to protect the company and to drive the highest and best purchase price, it takes a systematic process, experience, and most of all hard work.