Before there was an Internet, an M&A consultant would market a business by identifying the potential buyers and contacting them directly about the business for sale. The goal was to generate interest from several qualified buyers in order to have competition for the business and bid the price up. The business was not advertised publicly because, it was believed, this would primarily attract financially unqualified individual buyers. In addition, it would increase the risk that the identity of the business for sale would be discovered. The use of the Internet, by individuals and businesses has made this marketing approach obsolete.
In addition to the use of the Internet, the nature of the market for business sales has changed. Many years ago, buyers tended to buy businesses located relatively close to their business. There were a few reasons for this. First, the geographic market for most businesses was not as broad as it is today. The Internet has expanded the geographic market for many businesses and, as a result, increased their interest in buying businesses located farther away from their primary location that could service their market elsewhere. Businesses are doing business with other business located elsewhere in the world. In addition, better communication and faster travel make managing a remote business more doable.
Now that potential business buyers could be located anywhere in the country or world, it makes it practically impossible for an M&A consultant to identify all, or even most, of the potential buyers. To effectively market a business for sale, an M&A consultant needs to do more than just contact the identified potential buyers. The business needs to be marketed so that most potential buyers will learn of the business opportunity. The most efficient way to do this is by using online marketing.
The leading method used to market businesses for sale online is “business for sale” websites. Most of these websites are advertising small businesses for sale to individual buyers. Business brokers, who primarily sell smaller businesses to individuals, were the first to adopt this marketing method because the superior results were obvious. At the cost of one ad to advertise one business in a Sunday newspaper, all of the business broker’s businesses for sale could be marketed on the leading Internet business for sale website indefinitely. And, the businesses were marketed to a much larger group of potential buyers. The difference in cost/benefit was many-fold.
While business brokers enjoyed using the internet to discover new buyers for businesses, M&A consultants and investment bankers were prohibited to do so. They have been restricted by non-solicitation mandates by the SEC that doesn’t allow them to broadly advertise businesses they’re selling on “business for sale” websites the way business brokers can. However, the superior results of this marketing method could not be ignored and we are now seeing websites that cater to M&A buyers.
The new breed of M&A websites, like AxialMarket, are more like Linkedin or other networks than like the back pages of the Sunday paper. The networks are built around connections between advisors and buyers, helping your advisor find exactly the right firms connect for your company. These connections helping M&A consultants and investment bankers establish pre-existing relationships so they don’t violate non-solicitation rules.
The new websites have allowed the groups of buyers looking for businesses online to expand beyond the individual buyers on the old “businesses for sale” sites. Now other businesses and private equity groups also search for businesses online. We have made several sales of businesses to other businesses that found the company through our online marketing.
Effective online marketing is much more than just advertising a business on “business for sale” websites. I recently wrote a blog about the many ways to market a business online. When choosing an M&A consultant to sell a business, a business owner needs to look into how the M&A consultant will be marketing the business, online and off, and analyze how effective their total marketing is.