Understand your buyer

There’s a critical element to selling a business that isn’t always appreciated by business owners.

That element is Understanding your Buyer. By that I mean, understanding the value of your company to your buyer.

It’s really important that anyone selling a business is able to look at what their business has to offer from the acquirer’s perspective.

Most acquirers have a senior manager (or even a small team) who are responsible for evaluating potential acquisitions. Their role is to project how the transaction will affect their company and to assess the financial impact of a takeover.

They have to produce the business case for the deal, calculating whether there are enough cost savings and revenue generators to justify the acquisition. Therefore, the more you can understand what they will be looking for, the better positioned you will be to provide the information and evidence they will need to approve the business case and enable an offer to be made.

As a seller, this is a valuable exercise because it forces you to look at your business in a different way, which in turn means you become more detached and objective in relation to your business. This is an extremely useful skill that will stand you in good stead when it comes to negotiating a deal and actually leaving the business you founded.

There are some fundamental points to bear in mind and they centre around the synergies your company will bring to theirs. For example, your company may possess hard to find skills, operate in a market sector with high barriers to entry or have patented technology that the buyer needs.

As well as thinking about the positive value your business would bring, consider the counter-arguments – because their acquisitions team will be doing just that. This is also valuable for you because it will highlight areas where you can fine-tune your offering.

Once you clearly understand the value that your business offers, you need to be able to articulate that during preliminary discussions. Be sure to share it with your advisers; they will have considerable negotiating experience and will be able to reinforce your case.

If you’d like to learn more about selling a business and how to prepare for a business sale, come along to one of our Masterclasses. There’s no cost – other than about 3 hours of your time. Full details are on our website.

 

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