In this podcast, Ted Leverette of “Partner” On-Call Network interviews Tony Brown of Divest Merge Acquire. Ted and Tony discuss M&A bolt on scenarios to increase marketability and opportunity.
In this podcast, Ted Leverette of “Partner” On-Call Network interviews Tony Brown of Divest Merge Acquire. Ted and Tony discuss retaining a minority shareholding to achieve a great outcome for all stakeholders.
In this podcast, Ted Leverette of “Partner” On-Call Network interviews Tony Brown of Divest Merge Acquire. Ted and Tony discuss rescuing an M&A deal by restructuring with tax savings.
This article explains why a combination of 4 marketing methods delivers the best results when marketing business opportunities in the $1M+ enterprise value market.
These methods are:
- Direct approach – narrow based target marketing;
- Web-based, press or industry publications;
- Broad based targeted direct marketing;
- Combination of the above, simultaneously
Criteria include: Speed of process – time in market; competition amongst buyers; price outcome; conversion rate and client confidentiality.
Assume that other factors that will influence the outcome are positive or neutral: realistic price expectation, quality of information, reputable process and saleable business or asset.
1. Direct Approach – narrow based target marketing
‘You only need one buyer’. If a deal can be struck with one of these few, this may be the quickest and most efficient process. If you are lucky!
A small number of targets (less than 10) is a very narrow base to work with. The likelihood of ending up with no interested parties is very high. The process stalls, deadlines are extended and things continue to deteriorate from there.
The fewer prospects, the easier it may be to maintain confidentiality.
2. Web-based, press or industry publications
Most web-based marketing is passive and relies on active buyers. But what if a buyer isn’t looking?
It is relatively cheap to post advertisements which are accessible online 24/7 to purchasers worldwide, reaching those in the market within and outside the industry.
3. Broad based direct targeted marketing
The likelihood of success increases exponentially when a business opportunity is presented to those with the most to gain and the least to risk.
In the $1 Million+ Enterprise Value market, this includes buyers in the same or related industries.
Larger industry players and those in related industries can leverage an opportunity more effectively than general investors.
These are “Strategic buyers”. Making them aware of the opportunity is what direct marketing achieves.
Direct targeted marketing can put the opportunity in front of many target organisations and people, in the right industries, at the right time and on a scale.
The right database
Not just any database will do the job.
Divest Merge Acquire/MNA Direct’s built-for-purpose M&A database has been tailored specifically for the M&A market, incorporating all the following features:
- M&A database of over 215,000 companies, contacts and individuals across Australia and New Zealand has been specifically built to market business opportunities with Enterprise Values above $1M; primarily those suitable for B2B transactions.
- Covers organisations with more than 10 employees and corporate, private and international investors.
- The database is a product of investment over many years, with an estimated investment of more than $5M. It is understood to be one of the best sources of business intelligence available.
- Used continuously and updated regularly;
- Searchable and actionable by industries, regions or groups;
- Categorised by relevant industry classifications (eg SIC codes);
- Tracks each target organisation’s M&A aspirations;
- Key data on each company (across 90+ active fields and hundreds of unique attributes);
- Online accumulated history and investment parameters for active purchasers.
MNA Direct (an affiliate of Divest Merge Acquire) has formalised the direct marketing of business opportunities to the $1M+ market and made this facility available to others.
How to contact strategic buyers…
A combination of email and direct hard copy mailouts is generally most effective, depending on which is more likely to hit the target. While email is the preferred option, hard copy mailouts allow advisors to present the opportunity to a far wider audience of strategic buyers who haven’t subscribed or aren’t actively looking, but still fit the profile of buyers with the most to gain and least to risk.
Typical mailouts range between 1,000-3,000 targeted contacts per opportunity!
In combination with its in-house mail preparation and distribution capabilities, MNA Direct delivers a complete all-in-one package of direct, targeted marketing to key strategic buyer groups related to each individual opportunity.
The system promotes better results, faster. By targeting buyers more efficiently and with increased scope, MNA Direct enables M&A firms to attract a higher number of interested parties, increasing competition between target buyers and facilitating an accelerated process. Higher competition between parties with a strategic interest leads to the best possible results: higher prices and improved conversion/success rates.
4. Combination of the above, simultaneously
Using a combination of web-based and direct marketing methods, Business Opportunities can be marketed with precision, scale and advisory input.
Getting the timing right
It is easier to control the process by managing who you approach and when, rather than by setting due dates.
It is better to have prospective purchasers move forward as a group, rather than singly or in dribs and drabs. That way the advisory firm can assess more than one offer simultaneously without having to set a date to try and gather them up, which is rarely achieved, leading to offering an extension.
It is best to work with the fastest and most highly motivated purchasers and allow the others an opportunity to catch up, rather than slow anyone down waiting for others.
Therefore it is usually better to approach key targets at the same time as approaching the wider industry.
This is exactly the opposite of how many M&A advisory firms operate!
DMA’s MNA Direct system offers:
Complete direct marketing solution for M&A professionals.
- Proven solution – database used by M&A professionals for more than a decade.
- M&A database, mail house and response reporting ALL-IN-ONE.
- Complements your other marketing activities.
- Reach 1,000 targeted industry contacts by direct mail or email within 48 hours of activation for $3,850 plus GST*.
After agreeing on strategy, brief and targets, MNA Direct conducts all of the marketing in-house, collating responses and reporting all responses directly to advisory firms for follow-up.
For more information, visit www.mnadirect.com.
Our overriding advice is this: The single most influential factor over saleability and price is the creation of a market of strategically motivated, financially strong buyers. Whatever you do, don’t compromise this. Don’t ever enter a negotiation without alternatives. Having alternatives is essential and could be worth millions to you.
Being approached by someone wanting to buy your business may be irresistibly attractive, whether expected or not. An unsolicited offer could come from an industry player, private equity firm, a friend or even a competitor.
The attraction of a one-on-one process promises to be simpler, faster, less stressful and more confidential. However, you should resist the temptation to deal exclusively, and carefully consider all the ingredients of a successful transaction before committing to go one-on-one.
Many clients test their network to see if there is any interest and often engage advisors with one or more buyers already in tow. Sourcing a potential buyer is important, but a higher priority is to ensure you attract the most suitable buyer on favourable terms and have a capable team to manage the process alongside you.
You may have owned the business for many years, even decades. The best possible sale process should ensure you are set up for the optimal outcome and adequately rewarded by potentially adding hundreds of thousands or even millions of dollars to your overall sale outcome.
Which buyer will place the highest value on my business?
- Every buyer values each business differently according to their resources, appetite, investment criteria and how well the business fits with their business or their future strategies.
- Without a range of strategic buyers, you are unlikely to fully capitalise on your business’ value drivers to achieve the best outcome.
Does the process position me with sufficient leverage?
- A one-on-one process usually favours the buyer as the buyers have alternatives. Without competition and choices, the seller may be disadvantaged.
- Owners often waste months and even years on these one-on-one processes before abandoning them.
- The positive pressure of a competitive process with multiple strategically focused, committed buyers is the best way to ensure all buyers stay focussed, put their best foot forward and drive the price higher.
- Effective targeted marketing can generate many interested parties while maintaining confidentiality.
Do I have the experience to manage an intense negotiation and sale process?
- Most business owners don’t know what they don’t know about selling a business.
- Buyers are often much more experienced at buying and selling businesses than the seller.
- Your advisory team must be able to match the skills and experience of the buyer’s team to avoid being exploited by the many intricacies and highly technical elements that a transaction comprises.
- Experienced advisors understand tactics buyers use to achieve a better outcome for themselves and can pre-empt issues and offer solutions to maintain control of the process.
- Negotiating can be time consuming, emotional and become personal. M&A advisors provide stability and momentum, acting as a cushion or circuit breaker between buyer and seller to keep the process on track.
- Most seasoned buyers will welcome the involvement of capable M&A advisors on the sell side to support the business owner through the transaction, as this makes the whole process smoother.
Do my existing advisors have the expertise to optimise every aspect of the sale process?
- You wouldn’t rely only on a GP to handle a serious medical issue; you would insist on a specialist who knows specifically about your issue. That way you know you’ll get the best outcome. Selling your business is no different!
- The cost of an M&A advisor is minor in comparison with the potential upside to the sale outcome.
- Your preferred advisory team should have completed hundreds of transactions over many years, accumulating vast experience and knowledge to apply to your process and provide optimal solutions to every situation and issue. A GP legal, accounting or financial advisor cannot hope to bring the same expertise to the process.
Recommended steps when approached
Regardless of whether you are running with one or many buyers, these preliminary steps are critical:
- Let the target buyer know you are seeking professional advice to help prepare for and facilitate the process, and to await further contact – this tells them you are serious and that you want to do it properly.
- Engage a firm of M&A professionals to:
- Analyse your business to determine the strengths, financial and operational performance and opportunities for your business.
- Prepare an Information Memorandum and normalised financials as though you are going to the broader market.
- Analyse working capital for extracting and realising excess assets from the business before the sale.
- Provide a price guidance and confirm it meets your expectation and requirements.
- Prepare and manage confidentiality and contingency plans throughout all stages of a process.
- Obtain specialist tax advice for larger, potentially more complex transactions to assess the business structure and tax profile to minimise the tax leakage from the transaction.
- If still preferring to explore going one-on-one, assisted by the M&A advisor, you should commence the negotiation with both parties knowing that you have the option to revert to the wider market if they slow up or low-ball their offer.
- If the targeted buyer agrees to a fair price and other conditions, you may elect not to go to the broader market but retain the leverage to do so if the process loses momentum.
- Exercise great care and discretion when sharing sensitive information about your business by not giving too much or too little information at each stage including due diligence.
Still not sure? Don’t take our word for it. Here is feedback from former sellers and buyers
“…… As a business owner operator, if you believe that you fully understand the process of selling your business, you are in for a surprise. You do need the guidance and experience of someone like (DMA)…”
“…The purchase of a large-scale business can be a stressful exercise. We found (DMA’s) skills of mediation to be critical in what became a relatively smooth transaction. It is fair to say that as purchasers we may not have proceeded without (DMA’s) help & advice. We are ecstatic with the outcome…”
“… Overall a very professional and helpful service, particularly when the best interests of the vendor and the purchaser were in direct conflict…”
“(DMA’s) involvement from a purchaser’s viewpoint was the difference between a successful outcome or otherwise. Their response to queries and requests for information was outstanding. (DMA) is an excellent organisation and I would have no hesitation in recommending them to any prospective clients.”
“…There were times that we experienced frustration and angst either through our lack of knowledge or the process itself and you were always able to guide us through the ‘moment’ and keep us focused on the optimal outcome…”
“…I am sure that had the two owners been communicating directly, we would not have purchased the business. From a buyer’s point of view, detailed information supplied, and your honest upfront approach was excellent…”
Publicly Listed Companies get extra benefits from acquisitions. Understanding this can unlock great outcomes when selling your business.
This is part 4 of a series of videos analyzing the motivations of buyers and the dynamics of the markets in which they operate.
In this video we look at what drives publicly listed companies to make business acquisitions.
Publicly listed companies operate with a different set of business dynamics to private companies. Understanding their motivations is essential to optimizing your outcome when selling a business.
This video completes our series discussing who will buy your business and the different markets buyers operate in.
Understanding Private Equity Funds’ investment criteria is essential to achieving a win-win outcome when selling a business to these investor groups.
This is part three of a series of videos discussing the motivations of prospective buyers and the dynamics of the markets in which they operate.
We have previously discussed buyers from Buy a Job, Private Investor and Medium and Large Corporations and in this video we cover Private Equity Funds.
Did you know Private Equity Funds usually have a specific investment criteria? Understanding Private Equity Funds’ investment criteria when making acquisitions is essential to achieving a win-win outcome when selling to these investor groups. We outline their criteria in this video.
Make sure to watch out for the last video in this series discussing Publicly Listed Companies and what drives their acquisitions.
Here we look at who will buy your business and how the main volume of industry acquisitions take place among medium and large private corporations.
This is part two of a series of videos discussing the motivations of prospective buyers and the dynamics of the markets in which they operate.
In this video we discuss buyers in medium and large private corporations.
These private corporations are part of the Business to Business (B2B) market. This market usually consists of smaller industry players being progressively acquired by larger industry players.
So who will buy your business? Make sure you check out this video to find out more.
Stay tuned for part three of this series where we explain how private equity funds fit into the buyer market!
When selling a business it’s important to understand who will buy your business. Here we explain the motivations of buy a job and private investor buyers and the markets in which they operate.
Business owners who want to maximize their outcome when selling a business need to understand the motivations of prospective buyers and the dynamics of the markets in which they operate.
We have divided prospective buyers into 5 categories, which will be discussed in a series of 4 videos. These categories are buy a job buyers; private investors, private corporations, private equity funds and public companies.
In this video we discuss buy a job buyers and private investors.
Virtually every business sale and acquisition transaction involves a due diligence process. Many business owners don’t know what it is and what to expect, let alone how to prepare for it.
In this video we’ll outline what Due Diligence is, who is it for, when it is performed, and how owners should approach it and prepare for it.