Finding the right buyer goes beyond simply obtaining the highest possible offer. In addition to optimizing the sales price, sellers are generally looking for the most suitable buyer to ensure the continuity of the business.
To achieve this, it is important to clearly define what you, as an entrepreneur, want to achieve with the sale of your business. Do you primarily want to maximize the sales price, ensure the continuity of the business or achieve a pre-exit where, in addition to a partial realization of de ondernemingswaarde, you can also benefit from future value creation?
When identifying the right buyer, several considerations are important, including whether to choose a financial or strategic buyer, the buyer's rationale for the acquisition and any synergies and cultural compatibility.
Strategic buyers
The decision to choose between a financial buyer and a strategic buyer depends on the seller's specific goals and the nature of the business. A strategic buyer wants to improve its market position and achieve synergy benefits through an acquisition. This means that two parties can achieve more together than separately.
In contrast, integrating two separate businesses can be complex and time-consuming: operational systems and processes must be aligned, and cultural differences between two businesses can lead to conflicts regarding management styles, values and ways of working. As a rule, strategic buyers seek to acquire 100% of the shares.
Financial buyers
A financial buyer (including private equity firms) views an acquisition as an investment and are known for their focus on generating attractive returns. Their investment horizon generally spans 5 to 7 years during which they aim to maximize the value of the acquired business.
An important difference with strategic buyers is that financial buyers do not aim to buy 100% of the shares, but want the current shareholder(s) to retain a portion of the shares.
Hands-on or hands-off?
An important consideration is the involvement of financial buyers. Financial buyers may be involved to a great or lesser extent in the businesses they are acquiring. A hands-on investor is actively involved in the management and operations of the acquired business. This type of buyer takes a proactive approach to improving the performance of the business and works closely with the management team.
A hands-off investor, on the other hand, takes a more passive approach. They prefer minimal interference in the business's affairs and focus primarily on financial performance.
TransEquity Network is an example of a hands-on investor. We provide strategic direction and support to the management team and bring relevant industry expertise and experience to managing our holdings.
Rationale for acquisition
In any case, the buyer must have a clear rationale for the acquisition. This means that the buyer must be able to articulate how acquiring the business aligns with their long-term goals. The growth strategy (for example, introducing new products or services, pursuing greater market reach or achieving future cost savings) should be visible in the buyer's strategic plan.
Part of these plans can include a buy & build strategy (a strategy where the business itself takes over and integrates other businesses). A good alignment in ambition, vision and mission and the mutual roles between the buyer and seller is essential for both the transaction and the future success and continuity of the company.
