36 percent of middle market companies struggle to find the right partner when it comes to pursuing deals. Most acquirers begin their search by looking at a list of for-sale companies only to come away from the process empty-handed and disappointed. Many for-sale companies are on the chopping block for a reason. They may be in financial distress or come with additional liabilities such as management issues or customer concentration which an acquirer will have to take on post-closing. On the other hand, desirable for-sale companies are typically sold through an auction process where buyers bid against one another driving up the price.
If you are struggling to find the right company to acquire, here are three tips to help with your search.
1. Look at not-for-sale companies
For-sale companies are only a small subsection of all the businesses in the world. While you may be hesitant to approach these companies, keep in mind that “not-for-sale” simply means the owner is not currently thinking about selling – not that they will never Experience tells us that with the correct mix of factors including price, excitement, strategic alignment, and perks most owners can be persuaded to sell.
2. Develop criteria
Even before try finding companies to acquire, take some time to develop criteria for your ideal acquisition target. This way you have an objective system for screening out bad opportunities and making sure companies actually meet your strategic needs. Without criteria, we can gloss over or justify glaring issues because we become emotionally invested in a company.
3. Share a persuasive story
Finding the right acquisition target can be tough when the other side is not interested in selling. The best way to overcome this obstacle convince them that you are the best buyer for their company. Especially with privately-held businesses, where many owners think of their company as their baby, you must take the time to understand the owner and develop a persuasive story. The owner is not going to sell their life’s work to just anyone. Communicate what you as the buyer have to offer the seller and how the acquisition is beneficial to both sides.
Identifying the right company is essential for maximizing the success of your deal because buying the wrong company can derail your growth strategy. Follow these tips for discovering the right targets to help your company grow faster and stay ahead of the curve.