The Importance of Finding the Optimal Buyers
The lower middle market world has changed a great deal since the 1970’s or early 80’s. Once this market consisted primarily of family-run businesses who operated in a more casual selling environment. However, in today’s business world, there is ample pressure on sellers from private equity groups, search funds, and strategic companies.
It should come as no surprise that these various entities are looking to make big moves. They often communicate directly with business owners, hoping to land a deal. As a result, sellers often feel pressured by buyers and fail to see the big picture of the different buyer options that are out there that might be right for them.
The Modern Business Environment
When you think about the market 40+ years ago, it’s also interesting to note that often sellers had no business brokers or advisors to assist them with their deals. That led to small businesses trying to navigate the waters on their own and frequently led to costly mistakes.
In today’s market, thankfully, there are ample M&A advisors available across the country to assist sellers. But even with the best advice available, sellers still need to make the final decisions.
Common Business Owner Mistakes
What are the most significant mistakes that business owners can make when they do not retain the services of brokerage professionals? Often, they fail to get the timing right, and that negatively impacts their ability to get the best price.
In other situations, sellers view their businesses more like a sale of a house. Therefore, they overlook all the nuances of a business, such as customers, staff, and ideas and strategies. In some cases, they even undervalue their offerings and drive down their valuations. Sellers often assume that they will sell to a competitor. But this can also prove to be a costly mistake.
Achieving the Best Outcomes
When a M&A advisor truly understands their clients, it can help them achieve their best outcomes. For example, it’s important for us to learn if our seller clients want to stay on with the company. In some cases, they are not prepared to walk away, and that impacts our guidance regarding the optimal buyers for their unique situation. For example, if a business owner wants to stay on with the new company after the deal is completed, the best buyer often is a private equity fund.
We also seek to learn why our clients really want to sell and what they truly want the outcomes of their deal to be. When we consider outcomes, we think not only about the price, but also the impact on the people involved. Once we truly understand our sellers, it allows us to find buyers who are the best potential fits.
When we are evaluating buyers, we also look carefully at their acquisition histories to see if they are a strategic fit. This process saves everyone time and money and leads to a deal that is successful for all parties involved.
Glen Herman is Business Intermediary of Creative Business Services/CBS-Global.
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