Not understanding who might want to buy your Australian SME business?
Do you understand your customers? Of course you do. You know their likes, their dislikes and why they buy your products.
You need to do the same with buyers of your business otherwise you may fail to achieve the true value.
There will be various types of potential buyers for your business and they will be looking for the attributes we mention in our earlier paper about making your business “Sale Ready”?”
More explicitly your buyers will put additional focus in specific areas depending on the type of buyer they are:
a) Financial Buyer
A financial buyer may be a wealthy individual, family, Private Equity firm, or even a listed company looking to grow their portfolio of investments. They will assess your business mainly on its merits as a stand-alone business.
Typically, this category of investor is not expecting any synergies but does expect your business to be able to grow and prosper without your day to day involvement and with minimal input from them. It is absolutely critical that if you are to sell to a financial investor that you have a strong management team in place and preferably have a CEO in place who is actually running the business.
b) Industry Player
If someone in your, or an adjacent, industry is to buy your business they will typically be most focussed on how your business and their business could collectively sell more product/ services than either do as stand-alone businesses. Put another way, can your products be sold to their customers and vice versa?
They will be looking for synergies through gaining better buying and reducing back office costs and may be prepared to pay a premium for these strategic benefits.
An industry buyer will logically value your business more highly than a financial buyer as they should receive a larger increase in profit and should better understand the opportunity and risk of your business.
To better understand the needs of those two categories of buyer your adviser should break each down into various sub groups e.g. for industry players; same industry, adjacent industry, private company, listed company, growth focussed, risk focussed, local, multinational etc.
Your adviser would then research and understand who are the ideal buyers of your business and then target your sale process towards them.
Failure to understand your likely buyers can lead to failure to identify the best buyers, achieve competitive tension and achieve the right price or even the sale of your business at all.
For a discussion on selling your business, please call either Tony Holley on 0417313136 or Michael Mahoney on 0410 285 318 anytime – we at Hamilton Rich understand these conversations can be difficult to have during business hours.