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Finding Premium Buyers for Your Company

Let’s face it; anyone who wishes to eventually sell-out of their business and move on in life would like to go out with as many fireworks as possible. What does that generally mean in the M&A world? For some it means an “all cash” deal. Most others don’t generally care how they get paid as long as the money comes in—generally through some source of financing. What sellers tend to care about above anything else is a buyer who wishes to acquire at a premium.

Everyone wants to be the next YouTube—that sensational start-up that gets Google gobbled for a billion plus after barely a year of existence. In reality, such an acquisition is the exception rather than the rule. Unless you have a highly compelling reason for such a move by a large company such as Google, then you’ll most likely be having a traditional valuation and merger—not one that involves a heavy weighting of “goodwill” on the acquirer’s books.

The Network

Perhaps one of the best and proper keys to success when courting buyers is to see what type of network they have built. Longer-standing companies generally have more extensive networks. Some businesses, such as those involved in Global M&A or InternationalM&A have specifically partnered with national and international groups to expand their ability to connect with potential buyers from around the globe.

While the network is helpful it’s not everything (ask Verizon—they’ve been selling their “network” for years). Today’s proliferation of technology allows for nearly anyone with a connection to the web to search out and find those companies who may be up on the chopping block. Pay attention to the network. The next best thing to the network is the selling company’s guerilla marketing savvy and capabilities. This is check box number two in qualifying a potential seller for your firm.

Being a Premium Company

In our experience, brokering a deal is a lot like courting a mate. First impressions are always the most important. That means when it comes time to sell your business you need to put your best foot forward. Selling when the market is hoppin’ is helpful (this has been part of the problem over the last couple of years—bad returns for everyone makes it difficult to make anyone look good). Here is the specific piece of advice: if you want to be acquired at a premium, you need to be a premium. It’s that simple. There must be some differentiated asset or factor in the sale of your business—sometimes it is potential—which means you should have an extremely high reason to believe.

Not only should the Confidential Business Review look flawless, but it should showcase your company’s assets and successes in such a way that makes it irresistible. Here are a few specific pointers:

  • During the selling period be highly precise on all accounting and transactions which take place.
  • Sell, sell, sell. I am a intense proponent that the best measure of success in business is how much is sold. If you can sell massively just prior and during the courting phase, you will help to prepare yourself for a more premium acquisition.
  • Get your costs in order. When you can’t verily boost revenues, you can generally only look at the next best side of the books: costs. Don’t be too ridiculous here, but makes sure you slash some unnecessary spending. This will help to boost the bottom-line.

Sell your company’s sizzle. Not necessarily the steak and you will have positioned yourself for in a fantastic position, which may allow you to get potentially gobbled up by a larger organization. You never know; perhaps you are software company with some compelling “next killer app” which could be taken to the masses. If so you could find someone willing to acquire for 10X. However, I personally am more of a fan of steady, consistent and sustainabile businesses. Purchasing that type of premium is flirting a bit with speculation. But that is a topic for another day.

*Note: in saying this, it is important to understand that you can run the risk of overselling your company. Be sure you perform full disclosure to any potential buyers. The picture should not be more rosey than reality. Good acquiring PEGs should be able to see through this, but sellers beware.

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Nate Nead
Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC which includes InvestmentBank.com and Crowdfund.co. Nate works works with middle-market corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He is the chief evangelist of the company's growing digital investment banking platform. Reliance Worldwide Investments, LLC a member of FINRA and SIPC and registered with the SEC and MSRB. Nate resides in Seattle, Washington.
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