If you are contemplating selling your company, you may or may not have thought about who would be a good buyer. How to find a buyer for your business ? The first answer is often a larger company that operates within the same industry. These are known as “strategic buyers.”Strategic buyers are operating companies that provide either the same or complementary products or services as your company, and might be competitors, suppliers or customers of yours. Strategic buyers can also be companies that sell products or services that are unrelated to yours, but that see your business as a way to enter your market and to diversify their revenue sources. An example of this would be a trucking or logistics company that currently serves only one region of the U.S., but is interested in expanding into the Myrtle Beach, SC region. The goal of a strategic buyer is to identify companies whose products or services can synergistically integrate with their existing offerings, typically by increasing current market share or by 888-950-4924expanding into new markets, to create incremental long-term shareholder value.

The other major buyer category is “financial buyers,” which include private equity groups (PEGs), venture capital firms, family investment offices and high net worth individuals. Financial buyers, often referred to as professional buyers, are very literally in the business of making a profit. These groups typically focus on specific industries and target companies with attractive growth opportunities and sustainable competitive advantages, with the explicit goal of realizing a favorable return on their investment via a sale or spinoff of the target company.

Because these two types of buyers have fundamentally different objectives, they will typically assess and analyze your company in different ways. This means that when you are packaging your company for sale and when you begin buyer discussions, it’s a good idea to know who you are talking to.

Know Your Audience

Strategic buyers traditionally evaluate potential acquisitions in the context of how the target company will “fit” into the existing company and operations. The following are questions that a strategic buyer might pose during its analysis:

Does the target company serve the same markets (customer, end-user, geographic, etc.)?

Will we gain market share or gain entrance into a new market through this acquisition?

Does the target company offer different products/services that are complementary to that of the existing company and that we could sell to our current customers?

Would the target company cannibalize our existing customer base?

Are there manufacturing economies of scale that could be realized through an acquisition?

Does the target company possess proprietary practices or intellectual property that we want to own, or that we want to prevent our competitor from owning?

Before engaging in a discussion with a strategic buyer, it is a good idea to research the acquiring company and have an idea who their customers are, what products/services they offer, and what markets they serve. This will enable you to identify potential synergies and speak to specific value drivers that could potentially increase your company’s value from the perspective of that particular buyer.

Financial buyers, on the other hand, typically will not be integrating the target company into a larger company, which means that they generally evaluate a potential acquisition as a stand-alone entity. And because financial buyers are laser focused on ROI, it’s all about the numbers. Like strategic buyers, financial buyers are concerned about a target company’s customer lists, competitive advantages and markets served; however, analyses performed by financial buyers tend to focus most heavily on a target company’s stand-alone cash generating capability and capacity for earnings growth.

It’s All in the Presentation

One of the most important things you can do when preparing to sell your company is package it well. This is where hiring an experienced M&A advisor is well worth the investment. An advisor who has successfully marketed and closed multiple transactions will understand the importance of putting together strong marketing materials. This doesn’t mean writing a 60-page book, complete with color photos and all sorts of pretty charts and graphs. On the contrary, sophisticated buyers—whether strategic or financial—are often bothered by a lot of fluff. The vast majority of buyers appreciate a document that is brief and to the point.

Here again, an experienced M&A advisor will know the audience that will be reviewing the marketing documents and will understand what information the potential acquirers will want to see. Although strategic and financial buyers fundamentally have different motivations, both groups will still want to understand certain basic things about the target company:

What products and/or services does the company offer?

What customer and end-user markets do you serve?

Who are your customers? (Customer names are typically not divulged in the marketing documents, but this is on a case by case basis)

What geographic markets do you serve—Myrtle Beach, SC, regional, national?

What are your competitive advantages?

What does your Organizational Chart look like?

The ability to clearly and concisely articulate how the company makes money is critical. Being able to identify specifically what drives value for your business will help potential acquirers see the value in your company and may give certain buyers a reason to pay a premium.

With more than 30 years of M&A experience, WhiteHorse Partners‘ focus is on selling privately held businesses. We have valued and sold hundreds of companies and we have the experience necessary to determine the market value of a business located in or around Myrtle Beach, SC. If you would like to find out how we can assist you in determining the value of your business, or with the consideration and development of an exit strategy, we would be glad to speak with you. Please feel free to contact us at 1-888-950-4924 or email us at info@whitehorse-partners.com.