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How to find the right buyer for your company

by on September 25, 2016

finding-a-buyer

There are a lot of things that you as the CEO need to do to build a good company.  Many of those will also position your company to be acquired by a bigger company.  You can wait for someone to find you interesting enough to acquire or you can do something about it.

Preparing and Building Value

Things you can do to prepare for a sale that also build your company’s value include the following:

  1. Start prepping years before you want to sell.  Take the time to address the small details that will make your business more attractive and valuable.
  2. Clean up your act before you shop your company.  That means your books, policies, and systems.
  3. Trends of the last 2 years.  If your buyer is convinced that it can assume operations and continue making good money immediately upon acquisition then you’re in a great position.
  4. Make it profitable.  Attractive companies are profitable and reliable.
  5. Figure out what you’re really selling.  Is it the technology, your customer list, your recurring revenue, your geography?  What would a strategic buyer be interested in and focus on that.
  6. Look for a strategic fit in a buyer. What is your company particularly good at? What does it need from a buyer?
  7. Be prepared to air your dirty laundry.  Take a good hard look at systems, culture, protocols and personnel. Even if you clean up your act you will need to expose yourself and your company, and it will get frustrating, so do the work necessary to make yourself as transparent as possible with potential buyers.

How to find the right strategic buyer

While companies are bought, not sold, there are things you can do to encourage the process.

Initiating the deal often involves convincing a certain company executive that his/her life will be better if their employer buys your company.

In other words, instead of dreaming about selling your company to a particular company, like Apple for instance, figure out which division or executive within that company could benefit from the acquisition of your company. Focus on who is that person and how are you going to get to know them? And how are they going to believe in your company?

Those include:

  1. Identify potential partners and focus on the Top 10 first
  2. Create compelling partnering presentations
  3. Develop strategic value propositions for each prospective partner
  4. Increase your visibility – analyst reports, speaking engagements, conferences
  5. Approach the line side of the business – You need a deal champion inside the buyer. An acquisition has to make sense based on technology and/or customer opportunities.  Identify the right people to connect with that will enable that decision.
  6. Get high quality intros to the most senior people you’re connected to in each company.
  7. Build a relationship
  8. Have informal executive level discussions – make sure there is a common understanding of vision and strategic fit.

The objective of this effort is simply to generate interest.  Once interest is established, strong relationship management is crucial to moving through the process of an LOI, negotiations, and closing.

But you must continue to manage your business “As Usual.”  You can’t afford to lose that focus.  You can’t depend on the deal happening.  You can’t afford to miss a quarter revenue goal.  You have to continue to build a good company with clean books and sound procedures.

Summary

1.Focus on the business, not the M&A process.  The M&A process can be too distracting and difficult to time the market.

2. Solve hard, real business problems for your potential acquirers.

3.  Where appropriate, establish revenue generating partnerships with leading vendors around important customers.  One key customer can establish relevance.

4. Once starting a process, keep management and employees focused on sales execution and the business.  The process takes 6 – 9 months and quarterly performance matters.

5. Hire the best help you can – get counsel engaged early to clean up any lingering issues.

6. A financial advisor should manage process and timetable so you can focus on the business and to take the emotional stress out of negotiations.

7.  It’s important to get multiple bidders.  This helps with value and creates a sense of urgency, speeding up the process.

8. Culture matters.  While for your investors it’s a liquidity event, for the key employees it is a new working environment.  They’re instrumental to getting you to this point.  They need to land in a company that’s a good fit.

p.s.

If you’re wondering how you build a company that you can sell for a premium, contact me to discuss the Valuation Amplification Process.

I also invite you to download the white paper and learn the 5 step process on How to Quickly Increase Your Valuation: a Proven 5 Step Process.

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From → M&A, Strategy, Valuation

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