15 June, 2011

Private business exit: Q8. Who would want to buy it and why?

In my previous question in this series on planning for the sale of private businesses, we explored the types of buyer who could be interested in acquiring your business. Now we need to get down to exactly who would want to buy it and why; and equally importantly who should, but doesn’t, and why not?

This is about understanding what could motivate a buyer. If it’s a trade buyer, then you are likely to have a very good idea of who they are and what drives them. If it’s financial buyers you’re targeting, you may know some specific possibilities, or more likely you’ll be working with a broker who should. In identifying specific potential buyers, and why they are likely or not to be interested in your business, you can uncover ways to develop your attractiveness, and to design your sales campaign.

For example, when we prepared to sell advanced antenna manufacturer Deltec, we had several potential buyers in mind who would want our technology. We initiated an IP suit against the smallest competitor infringing our IP, and made sure all the significant players knew about it. We also stopped development of products which were struggling to keep up, since no-one would want them. And we refined our production processes for transfer offshore, which would make post-acquisition integration easy.

In particular, we identified one company as our prime target acquirer: financially strong, acquisitive, very interested in intellectual property rights, and wanting to substantially expand its range and share of our product and geographic markets. We opened our US sales office in their home town (also the home of our largest channel partner globally, and theirs). For months before we put out feelers about a potential sale, those guys kept hearing our name from their home market customers. So when we were ready to go to market, with valuable IP, a strong market position in our chosen niche, and a clean, easily assimilated business, they were hot to acquire us, and did, even though the tech market was in meltdown at the time.

First posted August 21st, 2008

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