A Comprehensive Approach To Finding Business Buyers

Given my background and experience, hardly a week goes by without a business owner asking me that all important question – “Tommy, what is the best way to go about finding buyers for my business?”  And my answer is invariably always the same – “There is a time-tested process to follow that will both find the buyers and maximize the value of your business”. 

For as long as businesses have been around, successful sellers have followed a time-tested process that allows them to unlock the value of their business, find suitable buyers, and maximize the consideration received.  Conversely, and equally importantly, for the buyers of these businesses, this time-tested process allows them to fully understand and appreciate the asset that they are purchasing and positions them to hit the ground running.

This magical process is not overly complicated.  It does however require discipline, a trusted and experienced team, and a commitment to follow the time-tested methods that we know deliver results.

Broadly speaking, the process can be broken down into four main steps:

1. Selecting a Team
2. Preparation of an accredited, third-party business valuation and materials
3. Marketing and Qualification
4. Negotiation and Closing

Let’s take a brief look at each of these important steps:

Selecting a Team

In preparing to sell your business, the most important step happens right up front – the team.  You need to have a team which is going to represent your best interests, guide you through the process from start to finish, help your maximize value, and has the experience to get you to the finish line.  Experience counts – both the collective experience of the firm that you will be partnering with and the individuals who you will be interacting with on a day-to-day basis.  An experienced team has not only “been there and done that”, but they also have a collective institutional knowledge and experience that can be brought to bear to help you achieve the results that you want and deserve.  Too often, fancy national firms with big advertising budgets just troll for sellers, sign them up, and never deliver.  And, at the other extreme, your friendly local accountant who might have served you well for a long time, is just that – an accounting professional and not an M&A expert.  So, choose wisely, and select a professional team consisting of M&A advisor, CPA and attorney that can get the deal done.

Preparation of Valuation and Materials

Next comes the hard work of preparation.  Yes, it is hard work, but the right team can make all the difference here.  A good team will often have a proprietary method to organize, study, and analyze your business.  While you, the business owner or CEO, might understand the business really well, that understanding does not translate into dollars realized via the sale.  A proper analysis is therefore critical to start the process of unlocking value.  Next, a process of freshening up your financial presentation is undertaken.  This often involves recasting your income statements and balance sheets to meet not only today’s best practices, but to also ensure that they truly reflect the underlying, and often hidden, economic performance of the business, specifically, the true cash flow the business generates.

With these two initial preparation steps in-hand, a good partner firm will require an independent third-party firm to value your business.  While these valuations often carry a small nominal cost, it is often hands down the best money one can spend in this entire process.  To have an analysis done by an independent third-party professional business valuation firm is priceless, as it often sets the basis for price justification and potentially even helping the buyer find a potential lender who can finance the transaction. 

The last step of the preparation process is to prepare “the book” – the confidential memorandum and presentation of the critical business information that buyers want to see.  An experienced team will know just what to include in this confidential memorandum and will be able to target potential buyers and investors with a comprehensive presentation that presents this vital information about your business in the best light.

Marketing and Qualification

Now that the preparation work is completed, the next step is to have your M&A advisor market your business – CONFIDENTIALLY.  Confidentiality is key to the entire marketing process. 

It assures that your business operations continue unimpeded and allows your partner to identify and approach potential buyers and investors.  This marketing step is best thought of as a two-pronged approach to deliver maximum value.  One prong of the marketing work is to summarize the “book” (the confidential memorandum and presentation material) and distill it down to a bite-sized, confidential non-disclosing blind profile version (meaning that they can’t specifically identify your business by name) that is then made available to key investor websites where thousands of domestic and international buyers and investors go to identify interesting businesses that they might want to buy or invest in.  If any of these thousands of visitors to these sites expresses an interest in the business profile that was posted, they would contact your partner to further engage. 

The second prong is to have your M&A advisor use their proprietary methods to identify, contact, and engage selected prospects based on their own internal contact databases.  An experienced partner can have well over a half a million data point CRM database that they will use to screen for specific niches, investor profiles etc., and then reach out to that list via emails, phone calls, and letters.  Often these experienced M&A advisors might have a buyer or investor who has already contacted them to express interest in acquiring a business or investing in a business in a specific niche.  This rich multi-pronged approach should generate a list of buyers and investors who will then be pre-qualified by a team at your disposal. This pre-qualification process ensures that no one is wasting your time or their time and gets everyone focused on a manageable list of qualified prospects.

Negotiating and Closing

Next comes the exciting process of showing off your business, and often the decades of hard work that went into build it, to these quailed prospects.  Once again, there is simply no substitute for experience in this part of the process.  Your M&A advisor will work closely with you to prepare for the meeting(s) with prospective buyers and investors, ensure that confidentiality is maintained in every step of the process, work to minimize any disruption to your business, schedule confidential on-site visits after normal working hours, and generally guide you step-by-step thorough this dance. 

From there, your M&A advisor will screen the offers received, help you compare them on an apples-to-apples basis so that you have a clear understanding and appreciation for the value being offered.

In this phase of the process, there is obviously a lot of back and forth, and some give and take to get a deal structure and overall price that meets your objective.  It takes two to get a deal done, and your partner can help you achieve the results you want while appreciating the needs of the buyer.  In the end, a great M&A advisor will have exceeded your expectations, brought you the value that you deserve, and got everything and everyone to the finish line.

That’s it.  The secret sauce to finding buyers for your business – good team selection, prepare, market, and negotiate. 

If you want to learn more, or just chat with someone who does this every day, feel free to reach out.  There are very few things more satisfying than finding a great buyer for your business.