Best Practices for Identifying Buyers of Choice

Business owners thinking about transitioning out of their companies must consider factors that help identify and target buyers of choice.  Certainly, active acquirers that consistently demonstrate an ability to pay handsome prices, close deals rapidly and continuously create shareholder value via acquisitions is a winning combination.

What follows is the most significant criteria, as well as some implications regarding one’s ability to obtain the best price, terms and conditions when selling one’s company:

Buyer’s Strategic Fit with the Client

Strategic buyers are called “strategic” for a reason. They are typically interested in companies with capabilities that are difficult to build via internal development. A strong strategic fit is the starting point for buyer selection; however, strategic fit does not necessarily mean “they do what we do.” Sometimes the best buyer for a company may be the one most eager to enter a new segment via acquisition precisely because market entry via internal development is too risky, costly or slow. Also subsumed under fit is culture – will the buyer respect the culture that has made the company an attractive acquisition candidate?

The better an owner (and investment banker) can identify and gain the attention of strong-fit companies and articulate the strategic rationale for a sale – from the buyer’s perspective – the better the chances of attracting the interest of those buyers.

Buyer’s Appetite for Acquisitions in our Client’s Segment

A company that is not in “buy mode” is not an attractive buyer even if the fit is compelling. An otherwise active acquirer may have deal fatigue at certain times. One’s banker should have a general sense of a potential buyer’s appetite for particular types of companies and domains at any given time.

Similarly, one’s banker should have a database of buyers and be able to share which companies have a reputation for paying top dollar for their acquisitions, versus which ones are bottom feeders that will fight you for every dime.  And, of course, deal structure, terms and conditions for any given price also matter.

Buyers will request a financial forecast to help determine a selling company’s value. Beyond establishing a competitive market for the sale of a company (e.g., via a thoughtful auction process) and successfully approaching strong-fit potential buyers, nothing can increase one’s likelihood of getting a good price than being able to provide and defend a credible forecast. In the absence of a credible forecast, the purchase price will not be maximized in favor of the seller. 

 Visit our Exit Planning Library to find additional resources to help guide you through the exit planning process.

Andre Sutherland

 

Andre Sutherland

Valuation

Orlando Office

407-621-2119 (direct)

asutherland@pcecompanies.com

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Daniel Kvarnberg

 

Daniel Kvarnberg

Valuation

Orlando Office

407-621-2132 (direct)

dkvarnberg@pcecompanies.com

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David Jasmund

 

David Jasmund

Investment Banking | ESOP

Orlando Office

407-621-2111 (direct)

djasmund@pcecompanies.com

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Eric Zaleski

 

Eric Zaleski

Investment Banking | ESOP

Chicago Office

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ezaleski@pcecompanies.com

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Mark Klopfenstein

Advisory

Atlanta Office

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mklopfenstein@pcecompanies.com

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Melissa Ritter

 

Melissa Ritter

Investment Banking

Orlando Office

407-621-2128 (direct)

mritter@pcecompanies.com

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Michael Rosendahl

 

Michael Rosendahl

Investment Banking

New York Office

201-444-6280 Ext 1 (direct)

mrosendahl@pcecompanies.com

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Will Stewart

 

Will Stewart

Investment Banking | ESOP

Orlando Office

407-621-2124 (direct)

wstewart@pcecompanies.com

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Woody Whitcomb

Investment Banking

Orlando Office

407-621-2113 (direct)

wwhitcomb@pcecompanies.com

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Michael Poole

Investment Banking

Orlando Office

407-621-2112 (direct)

mpoole@pcecompanies.com

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Paul Vogt

Valuation

Atlanta Office

678-641-4760 (direct)

pvogt@pcecompanies.com

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