Bracebridge Corporate Finance provide an insight into the process of identifying and approaching potential purchasers.
One of the most important aspects of the sale process is ensuring that the most suitable potential purchasers are identified and they are approached in the right way.
Firstly, it is critical to identify the key drivers for the acquisition by a purchaser which will then help to focus the research on different types of purchaser. They are typically as follows:
- Competitors – who are the key competitors who would see value in acquiring your business and effectively taking a competitor out of the market and gaining market share. This is one of the most common drivers of an acquisition. However, the buyer must consider any impact of the acquisition, such as existing customers who may not be comfortable dealing with the business under new ownership.
- Companies seeking entry into new markets or distribution channels which your company offers eg a company offering an on-line solution.
- Companies seeking to extend their range of products or service offerings.
- Companies seeking to acquire in a new country or region as part of their geographic expansion strategy.
- Companies seeking to acquire skills or capabilities which they don’t have in-house and can be developed more quickly through an acquisition than by developing organically.
- Private equity investors who are keen to back the existing management team assuming that a succession plan has already been put in place and the business does not rely on the existing owners.
Once the above drivers have been identified, the search for the purchaser commences. The process to identify companies should be rigorous and ensure no stone is left unturned. Bracebridge use multiple sources of intelligence to identify such purchasers. Its most important source is its proprietary database of acquirers across a range of sectors, which is updated daily with the activity of potential buyers.
Once the research has been completed, it is important to pre-qualify purchasers to ensure their strategy meets the profile of your company. It is also critical to pre-qualify the purchasers by reviewing their ability to fund a transaction and their track record of completing transactions.
The next critical step is ensuring that purchasers are approached at the right level and in the right way. The purchaser should be contacted at the most senior level possible, usually at CEO level, or in the case of very large companies, it may be more appropriate to approach a Corporate Development Director, who is responsible for mergers and acquisitions. The initial approach is critical and should focus on why the purchaser should acquire your company. An early meeting with potential purchasers is the next step, giving you and your adviser the opportunity to “look the purchaser in the eye” and make sure they are serious.
Adopting the above approach usually leads to a much more successful sale process, focused on the most suitable buyers and creating some healthy competitive tension.