Most M&A advisors strive for, and business owners dream of receiving multiple offers, with prospective investors fighting over their business.
DMA’s marketing process regularly delivers multiple offers for businesses.
When this happens, the focus shifts from ‘if the business sells’ to ‘who is the best prospective investor to sell to?’
Often there is a standout bidder.
However, sometimes the decision is more complex.
Price may be the key deciding factor, but other considerations may feature and even take precedent.
DMA has developed and used for 20+ years, an offer ranking system to help owners weigh up a range of factors to decide among a contingent of worthy candidates.
Prior to going to market, we invite clients to prioritise their transaction objectives including:
• Price
• Speed
• Strategic fit
• Certainty
• Investor’s ability and commitment – financial and otherwise
• Dependence on external finance
• Clean exit with limited contingencies
• Value maximisation – acquisition motives and plans for the business
• Confidentiality/limited disruption to staff and customers
The offer ranking system evaluates a range of sub-factors among these key objectives, with provision to provide weighting to each one and then to rank them for each bidder.
Some factors may surprise you – for example – the suitability of other bidders as backups.
Other common considerations are:
• Transaction structure
• Due diligence requirements
• Risk of price write downs
• Buyer sophistication
• Finance conditions and financial capacity
• Buyer board approvals
• Buyer regulatory implications e.g. ACCC, FIRB
• Duration until unconditional and completion
This systematic approach can help business owners objectively assess their options, without relying on emotion, headline price or any other single aspect.
Author – Tony Brown
