Finding the perfect buyer…
The odds of simply stumbling across the perfect buyer for your company are similar to the odds of getting struck by lightning – about 1 in 10 million according to the British Medical Journal. Or in other words, it could happen, but it most probably won’t.
So, if you want to find the perfect buyer for your company, you need to start searching – this is why research is an integral cornerstone of our service. In this article we look at the three key steps in researching for prospective buyers and why you need to look in some places you might not have thought about.
Step 1: Buyer Persona
This is a marketing technique which you may well be familiar with. Essentially, we need to create a profile that gives us an outline of what sort of company might be interested in buying yours. There are lots of questions that we ask in order to do this, but they fall under the following three categories:
What do they do?
The temptation here is to immediately think of competitors, but while they might buy, they are rarely the source of the best deals. On the other hand, of course, a company in a completely unrelated sector is unlikely to see the synergy value in acquiring your business. The ideal is somewhere in between, a company that is offering different services to the same clients.
Where are they based?
Over 50% of our clients sell to overseas buyers and almost all generate some interest from outside the UK, so it’s definitely worth looking beyond our own shores. Data from 2022 published by Refinitiv shows that the UK is, by some distance, the second most targeted nation for acquisitions. This is supported by our own data which shows that, at any given time, we are actively engaged with companies from 21 countries across our live projects.
Are they big enough?
This is a fundamental question at the heart of assessing their ability to execute on a deal. There is little value in approaching someone who couldn’t make a good offer, even if they wanted to. Of course, it’s not just about how much cash they have and even that can be tricky to assess, particularly outside of the UK where financial reporting requirements are less rigorous. You also need to keep in mind that some companies that look too small may be backed by larger businesses or even Private Equity money. Our skilled research team often have to be quite creative in determining whether a potential acquirer fits this category.
Step 2: Identify Companies
Now you know what a good buyer might look like you can start your search for companies that fit within that profile. A significant proportion of our costs as a business are dedicated to this area for three key reasons. 1 – you need access to good data and market intelligence, 2 – you need skilled people who can interrogate and then critically evaluate that data, 3 – it takes time, depending on the complexity of the project but we are talking weeks, not days.
There may be a certain number of obvious candidates and clients often feel they have a good idea who will buy them. However, they often find that they are surprised at where the interest comes from, and crucially where it doesn’t. One of our previous clients, Steve Lees, owner of ATE Solutions told us… “I always thought that we would sell to a competitor. Somebody who was in the electronics test market. I started off with a list of half a dozen companies I thought might be interested in us, so to find mainly overseas buyers was very much a surprise to me.”
Step 3: Qualify and Finalise the List
Creating a list is one thing, being able to use it is another. Ideally you will have a good rationale for each prospect identified and it may be tempting to make some assumptions about who the ‘top’ candidates are. However, in our experience it’s best to let the process uncover the interest and not to allow preconceptions dictate your approach.
The next part of this is identifying who within those organisations to contact and to obtain the right contact details for them. We typically target three senior decision makers for each prospect. As we are talking about quite senior people, this can be a challenging task. It often takes some clever tools, some lateral thinking, and some sheer determination… which is where we come in.
Finding the perfect buyer for your company is not an easy task, it is certainly highly unlikely that they will find you, so you must be intentional. There are resources available to help you do this, but many of the most useful ones are inaccessible to business owners. The skills and experience of the person doing the research is also of a high priority. Professional and experienced support in researching potential acquirers is critical to the success of any business sale process.
If you’d like to learn more about how Entrepreneurs Hub could help your business find the perfect buyer, please get in touch. Our team of trusted advisors are on hand to discuss your options with no obligation and in total confidence.