In my last blog, I explained what the strategic value of a business is. The strategic value of a business is the extra value of a business – beyond its financial value – to a particular buyer. The problem is knowing who those buyers are and getting them to pay you, the seller, for the strategic value. A buyer recognizes that they are bringing the strategic value to your business so they don’t want to pay you for it unless they have to do so to buy the business. We use the M&A Process to get you, the seller, paid for the strategic value of your business. Here is how it works.
The first step in the process is developing a professional presentation for the buyer which will explain the features, benefits, and potential strategic value of your business to them. When we contact the buyer, we want to be sure they recognize the financial and strategic value of your business so they are willing to pay for them. You know your business very well, but the buyer does not. Some of the best buyers, such as Private Equity Groups, may look at many potential businesses to buy. They need to quickly be shown the benefits of your business so they take the time to look at it further. In most sales, we will not set a price for the business. We are dealing with buyers who will make their own determination of what the business is worth to them. Setting a price will put a cap on potential offers.
The second step in the process is to develop a list of potential buyers. This is an important part of the process. It takes a lot of time and creativity to create this list. Some potential buyers are competitors or other companies in the industry who would benefit by purchasing the selling business. We want to not only contact potential industry buyers, but ones that may be in related industries or suppliers. We want to contact all businesses that could find strategic value in buying your business.
You may be questioning whether the identity of your business will be kept confidential. We understand that if it was known by your employees, suppliers, or customers that your business was for sale, it could damage your business. In our marketing, we take steps to make sure that your business is not identified by its location or characteristics. We screen buyers to be sure we are dealing with genuine buyers. You can be part of the screening process. The identity of your business is kept confidential until a potential buyer signs a confidentiality agreement.
In addition to the potential buyers we identify, there may be potential buyers that we don’t identify. We reach them through working with buyers’ representatives and Internet advertising. Today, it’s an International market and the beauty of the Internet is that it reaches this potential market.
The next step in the process is to contact the potential buyers about your business and initiate an auction process to receive offers. Part of the process of identifying potential buyers is to identify who to contact. In a smaller company that is likely to be the owner. In larger companies, there may be officers who review potential acquisitions.
The use of the word “auction” may scare you. I am not referring to the Ebay type of auction or public auctions that you may have attended. This is a private auction. The only participants are those who have been screened and signed confidentiality agreements. The goal is to receive multiple, competing, offers. There is a deadline for buyers to present offers and the offers are not revealed. You choose the best offer.
This blog was just intended to be an introduction to the M & A Process. The purpose was to show you how we can get buyers to pay you for the strategic value of your business to them. Without using this process, it is likely that a seller will receive much less for their business than is possible. Contact us to discuss your specific situation and get your questions answered.
