EDGEMONT CAPITAL BLOG
The Six Buyers Who Belong on Every Acquirer List
The best possible buyer list can make or break a potential sale. Don’t forget the following six types of key buyers when building your list of potential acquirers.
Strategic buyers often pay more than financial buyers. This doesn’t mean that family offices, PE, and other financial buyers are unworthy of your consideration. Financial buyers are adept deal makers, and may make dozens of deals each year. They know the standard sales process, and usually have clearly defined internal processes to support a smooth, efficient deal. Even when you opt to choose a strategic buyer instead, early work with a financial buyer can ensure discipline to support the process as it gets going.
Financial buyers are also more likely to come to the negotiation table, boosting the certainty of the deal if you have fewer interested acquirers than you anticipated.
Hybrid strategics are financial buyers who own a similar business and are looking to add to it. They closely resemble strategic buyers. They’re heavily motivated, seeking synergistic purchases, and are often more willing to pay a premium than financial buyers who have no operations in the sector. They are experienced financial buyers, and run disciplined processes that address areas of potential value and overlap.
Competitors are obvious front runners in the sales process. There may be enticing synergies when a company competes in the same market as yours. The more the business needs an asset, the more the acquirer will consider paying. When there are more synergies in the merger, a competitor can often justify handing over more money, which makes competitors potentially lucrative buyers.
International sales partners offer new perspective and value. They may also have different reasons for their interest in your business than domestic buyers. Network with deal professionals who can strengthen and expand cross-border relationships. To access more international buyers, you’ll need to develop relationships built upon reciprocity. You’ll also need local knowledge and cultural competence to get the deal done.
Specialist Financial Buyers
Include specialist sponsors. If your advisor frequently works in this sector, they’ll almost certainly include these buyers. If they work less frequently in your sector, it’s still worthwhile to seek out these buyers. Specialist financial buyers often work with industry experts, and tend to have a more nuanced understanding of the market, and the opportunities that your business offers.
Buyers with unused capabilities are even better. For example, a firm that specializes in a few sectors, but isn’t currently invested in yours may have a strong incentive to change that. An expert on the team might get a chance to utilize his or her expertise. He or she will be highly knowledgeable, and can act as an in-house advocate for the deal. The natural inclination to fill an expertise capacity gives specialist buyers with experts in your sector much to offer your business.
Success in business often means reaching beyond what you can easily achieve, and sales are no different in this regard. The best buyers aren’t always obvious, or accessible. Though companies are typically sold to the obvious, most likely candidate, this doesn’t have to be the case. Selling is a game of numbers, and at least a quarter of businesses sell to an unanticipated acquirer. The more qualified buyers you add to the list, the better the chances are of success—even if the buyer seems like an unlikely one.