There may not be many key players in your industry with the available capital to invest in acquiring your corporate business. The larger your company is, the fewer the number of potential buyers. Many of these buyers are already known to you, so it’s likely that when you sell, your specialist Mergers & Acquisitions corporate broker will facilitate some form of a competitive bidding process. So, what’s your action plan for the 18-24 months leading up to the start of the competitive bidding process in order to achieve the maximum value?
Firstly, identify these players
They may be direct competitors of yours now, or they could be local or even overseas operators who know that buying the niche you’ve worked so hard to carve out is cheaper or less risky than trying to do it themselves.
But think beyond that. Which companies in related industries (or those corporate businesses in a different stage in the supply chain to your company) would also benefit from acquiring your company?
Now think about how your industry will change in the next two years and what these companies will need from your company. Perhaps it’s access to your client database, or your skilled and knowledgeable employees, or your IP, or your brand? So work on strengthening those assets. The more value an acquirer can see in such assets, the higher the price they’ll be willing to pay for your company.
Secondly, monitor and track industry developments
Competitive intelligence technology has progressed to the stage where you can set up news and company alerts on every mover in your industry. What announcements have they made? How has their website changed? What product innovations have been made in your industry and how are they impacting the market? What related industries are slowly aligning themselves with your industry? What substitute products and services are becoming available that could threaten your industry? There’s a wide range of electronic tools for sophisticated tracking. Some are free like Google Alerts, others like D&B 360 and IBISWorld are subscription based, but a sophisticated M&A company like LINK Corporate can utilise these tools on your behalf.
Thirdly, be flexible with the terms of the deal
When the time comes to sell, don’t be in a hurry to depart. Even if you’ve done your job correctly, and worked hard to restructure your company to lessen the dependency on you, a smart acquirer is buying on the basis of synergies – i.e. 1+1=3.
Their motivation behind the acquisition is that they can see opportunities to increase the profits of your company and the profits of their core operations. To achieve that they’ll need your expertise and experience in transitioning, in maintaining the loyalty of your key people and in ensuring that the strengths of the two sides of the merged operation flow through to the other. Consequently, you may not receive the full sale price on exchange of contract, and deferred payments may well be linked to future performance. Accept this reality and enjoy the challenge of being the pivotal person in the merged operation.
When considering your large business sale, keep in mind this simple ‘ABC’ formula for your business sale:
(a) plan ahead
(b) monitor and track industry developments
(c) be prepared to be flexible with the deal and your eventual exit.
