Are you considering selling your business? If so, sophisticated buyers seeking acquisitions will typically have specific expectations a desired target should possess. The M&A advisors at Doeren Mayhew Capital Advisors explore what may appeal to a large number of prospective buyers to help you maximize value and complete a successful transaction.
Types of Buyers
Before you start the process of identifying the ideal buyer, you should assess and consider the landscape of prospective buyers for your business and their investment criteria and motivation in determining a perfect match. Buyers will fall into one of two categories or a hybrid/combination thereof:
- Strategic Buyers: Companies pursuing acquisitions to increase market share, expand product offerings and yield synergies, among other things, are considered strategic buyers. Often, they have strategic objectives and expectations for the acquisition target to meet. The target’s strength to accommodate or facilitate meeting those strategic objectives and expectations drives its desirability.
- Financial Buyers: In the business of raising and pooling capital for deployment and investment in companies, financial buyers may be less focused on strategic objectives and more on financial criteria or metrics to seize opportunities as they arise. Typically, these buyers or firms have developed focused investment criteria that fulfills or suits their well-defined investment goals and strategy. The more criteria the target meets, the more attractive it may be.
Standing Out
Often, buyers assess and evaluate targets based upon their objectives and criteria considering among other the following key value drivers: revenue and profitability, market position and competitive landscape, products or services, and operations. Before considering selling your business, consider, assess and identify these common characteristics to help you stand out to prospective buyers and maximize your company’s value.
Revenue and Profitability
- Solid profit margins and/or ability to drive margin improvement
- Ability to grow revenue and profitability
- Recurring revenue
- Consistent cash flows
- Limited bad debt/stale receivables
- Institutional or brand sales
- Visibility/predictability of projected sales
- Low customer concentration
- Minimal capital expenditure requirements
- Low working capital requirements and cyclicality
- Limited need for discounts or incentives
Market Landscape
- High barriers to entry
- Low cyclicality
- Strong purchasing power vs. vendors
- Low purchasing power of customers
- High switching costs for customers
- Availability of alternative sources/vendor
Product or Service
- Defensible market position
- Differentiated from competitors
- Intellectual property/proprietary products
- Brand and/or name recognition
Operations
- High-quality financial reporting
- Audited financial statements
- Solid reporting infrastructure
- Strong production/delivery model
- Excess capacity
- Limited potential product/service and environmental liability
- Strong management depth
- Transaction-friendly corporate structures
Attracting the right buyer through a marketing for sale process can be a challenge in a competitive and complex marketplace. Do not miss out on opportunities by failing to consider and assess all your options to maximize value and/or market timing. Engage the experienced team of licensed investment bankers at Doeren Mayhew Capital Advisors to help you get noticed and put the pieces in place to facilitate your optimal deal. Contact us today.
