Who would buy my business? We get asked that question all the time by business owners who know they will have to exit the business at some point down the road. Often, business owners dream that they can pass their businesses to children or key managers. When those dreams are not realistic, selling to an outside entity becomes the only option outside of liquidating the business.
Understanding the types of buyers which would be interested gives the business owner a framework for positioning their business for the eventual sale.
Strategic Buyers. Strategic buyersare typically companies that have identified a strategy for growth and are looking to fill operational gaps to make the strategy a success. The strategic buyer could own a business in the same industry or a complementary industry and want to offer additional products to an established customer base. Or it might want immediate access to customers outside the current geographical reach of the company.
Recently, Abraxas helped a client sell a business to his largest competitor – the market was not big enough for both of them, but as one company the buyer should do well, and our client can enjoy a comfortable retirement.
Private Equity Groups. Private equity groups (PEGs) typically operate under mandates to acquire businesses in specific market sectors. PEGs are financial buyers and generally focus on a detailed assessment of the cash flows generated by their targets. These buyers often look to have the sellers stay involved in the business for a few years after the acquisition of the targeted company.
Individual / Small Group Investors. Certain investors are looking to invest in a specific industry or type of company because of opportunities identified as they researched industry or economic trends. These investors have fresh ideas they believe will be the key to succeeding in the future and are looking for companies that fit their investment criteria.
An Individual. Many dream of owning their own businesses, especially in an industry for which they have passion or a special affinity. In exchange for living their dreams, they are willing to risk the investment in a small- to midsize company that is well-established and offers easy entry.
As with any marketing initiative, identifying potential buyers and understanding their motivations are the first steps to a completed transaction. Engaging advisors that have in-depth knowledge across many industries and have the expertise to evaluate buyers’ expectations is critical to the process. Only then can targeted marketing messages be created and used to capture the attention of the right prospects.