Are you ready to sell your business? OK! But before you cash out, you’ll need to find potential buyers. Middle market companies should generally be marketed to two broad groups of potential buyers: financial buyers and strategic buyers.
Know your targets
Financial buyers tend to be professional investors that don’t have deep operational experience. These buyers, mostly private equity firms, family offices, and the like, tend to seek companies that have existing management teams that will stay with the company after a transaction and continue to operate as a stand alone company. Many can and will add industry experts to the company in management or board positions, but generally, they don’t want to run the company on a day to basis.
Alternatively, strategic buyers are existing companies (either public or private) that are looking to add capabilities or competencies that your company can bring to them. Larger strategic buyers are more likely to roll your company up into their operations to take advantage of synergies.
Some advisors will argue that you should limit marketing to a small group of targets. I have generally not taken this approach. I find that it is best to be as broad as possible with targeting, as I have had very good transactional opportunities arise from very unlikely buyers. While there can be risks to every marketing effort, the value of finding the right buyer usually far outweighs the risks associated with marketing to a large group of targets.
It is difficult to tell in advance who the right buyer will be. While historically, strategic buyers have had a reputation of being able to pay more than financial buyers for companies, the “right” answer largely depends on your goals.
Begin the process
Contacting potential acquirers is usually handled in steps. First, your advisor will contact targets in a broad, anonymous effort, whetting their appetites without identifying your company. Then, the advisor will vet buyers, ensuring that they are serious. At this stage, your advisor should be entering into non-disclosure agreements with targets prior to providing them with any identifying information about your company.
Marketing your company will take one to three months (or more) from the time you bring an advisor on board. This depends on the speed at which you are able to provide him with the information he needs to put together the marketing package and the breadth of potential targets.