Selling Your Business
Maximising Your Business Sale: Finding Strategic Buyers for an Acquisition Offer
If you’re an owner seeking the highest possible multiple for your business sale, you must understand what large companies like Apple seek when they make a targeted acquisition.
You see the big M&A headlines on the finance report every other night: Nvidia Acquires Run:AI for $700m. Or, Apple buys Beats for $3 billion. Often, the figures around the “Magnificent Seven” are jaw-to-the-floor paydays that stir envy in the heart of any business owner. And, while most Australian business sales might not gain an owner entry to the coveted ‘three-comma club’, there are ways any business can be better positioned for a targeted acquisition.
That’s because the number one tip for a business owner to maximise the sales value of their business is to sell to a strategic buyer. Owners who get this right maximise value at the highest possible multiple.
A strategic business sale is possible even for those running a relatively small family business. However, it’s often the emotional attachment and identity tied to the business that adds complexity to the selling process.
On the one hand, will you remain at peace if they scrub your name off the awning or break up what you’ve built? Conversely, if your liquidity event relieves chronic stress and sets up your family for generations, does that matter? If you’re game, your power now is to build your business into one that’s irresistible to a buyer and reach the highest multiple. And of course, exit on your own terms.
By approaching the sale of their business strategically, owners can drive up the selling price, maximise their exit value and ensure a smooth transaction.
In this article, we will cover key topics such as identifying buyers who will pay a premium, preparing for a successful business sale, understanding your business’s value, and effective negotiation for business owners.
Maximising Your Business Sale: Identifying Buyers Who Will Pay a Premium
One of the most important steps in business sale transactions is identifying the right buyers who see the true value of your business and are willing to pay a premium for it. Understanding your customers’ willingness to pay for your products or services can also help in showcasing the true value of your business to potential buyers.
To attract strategic buyers, it is essential to showcase the unique strengths of your business and align with buyers’ goals. This can be achieved by highlighting the competitive advantages of your business, such as a strong brand, loyal customer base, or proprietary technology.
Apple: The best-known strategic buyer
Apple is known for its strategic acquisitions and has a clear vision regarding buying businesses. They typically target companies that can provide them with a competitive edge, either through innovative technology or by filling a gap in their product offerings.
Apple’s acquisition of a voice recognition software company would be far more valuable to them than, say, a private equity firm, given their market position and ability to leverage that technology across their products. Owning the IP helps fuel their product innovation while simultaneously reducing the chances of their competition, like Samsung and Google, gaining an edge with that same technology.
Apple’s approach as a strategic buyer is not just about acquiring another business; it’s about integrating new capabilities and enhancing its ecosystem. They look for businesses that align with their long-term goals and have the potential to contribute to Apple’s growth, acquiring companies with strong research and development capabilities, a robust intellectual property portfolio, or a unique product that complements Apple’s existing lineup.
When Apple identifies a potential acquisition, its M&A team assesses the business through a strategic lens, doing their due diligence, considering whether the business is attractive, what key features it offers, and whether it’s ready for sale or exit. This thorough evaluation ensures that any acquisition is poised to add value to its operations and product strategy.
In negotiating deals, Apple is known for its effective negotiation strategies, ensuring that it not only acquires the business but does so on terms its shareholders consider favourable. Apple’s M&A teams are among the best in the art of negotiation, adept at navigating complex discussions to reach an agreement that benefits their strategic objectives. Apple’s strategic acquisitions are key to it retaining a competitive edge in the ever-evolving technology industry.
Preparing for a Successful Business Sale
Preparing your business for sale is a crucial step in ensuring a successful transaction. The preparation is a little like what you’d do before asking for a loan to open up five new branches simultaneously. Your financials and business fundamentals need to be bulletproof.
Before a buyer comes knocking, you’ll want to have already conducted financial audits, improved business processes, and ensured compliance with relevant regulations. By taking these steps, you can present your business in the best possible light to potential buyers and increase the likelihood of a successful sale.
Delegating any of your responsibilities to key people, capable managers or employees early on can enhance the perceived value of your business and demonstrate that it can run without direct owner involvement.
Understanding Your Business’s Value
Assessing the value of your business is an essential step in setting realistic goals and making strategic decisions. A business valuation considers various factors, including financial performance, market conditions, and growth potential. Benchmarking to get a more accurate picture of your business value can help you negotiate a fair price and ensure that you receive the maximum value for your business.
Getting Your Business Sale-Ready
Be advised that making your business more attractive to potential buyers may take months or even years. Being the ‘best-looking business on the block’ might mean streamlining operations, securing intellectual property, or building a solid management team. For example, your ideal business buyer may use a particular ERP or CRM platform. Migrating to that same platform may increase the appeal of your business to the potential buyer, knowing that their business will easily integrate with yours.
Identifying Potential Buyers
Several methods exist for identifying potential buyers, including networking, hiring a broker, or listing the business for sale. By combining these methods, you can increase your chances of finding the right buyer for your business.
The two main types of prospective buyers are strategic buyers and financial buyers. Understanding the psychology of buyers and what they look for in a business acquisition is crucial for a successful sale. By understanding their needs and expectations, you can tailor your approach and increase the likelihood of a successful transaction.
Strategic buyers are typically looking for synergies, market expansion, or complementary assets that can enhance their existing business operations.
Financial buyers are generally focused on the potential for financial return, seeking businesses that offer strong cash flow, growth potential, or an opportunity to improve profitability.
When selling your business, attracting a strategic buyer can be a game-changer. These buyers are not just looking for a good deal; they seek a strategic fit to propel their business forward. With this in mind, you can better demonstrate your winning attributes to make your business irresistible to them.
Strategic buyers are looking for businesses that offer a competitive advantage, whether it’s through innovative technology, a strong customer base, or a robust financial performance.
Key Questions: How to Prepare Your Business for Sale
Your business must be in top shape to attract the best strategic buyers. This means having clear financial statements, a strong management team, and streamlined operations. A well-prepared business is like a well-staged home; it sells faster and for a better price.
How Do You Market Your Business Effectively?
Just like selling any product, you need to market your business effectively. That might include working with a public relations consultant and compiling newsworthy matters relating to your business. Getting these stories into trade magazines early and often helps highlight your strategic value. Highlighting your business’s strengths and increasing revenue through high ROI campaigns across various channels can pique the interest of strategic buyers and provide credible evidence of your value growth over time.
How Can You Showcase Your Business’s Strategic Value?
To attract a strategic acquisition, you’ll need to showcase how your business can add value to theirs. Back to Apple, they look for companies that can enhance their ecosystem and align with their long-term goals. A bit of research on their trajectory and interests can help you demonstrate how your business can offer your strategic buyer a competitive edge or fill a gap in their offerings.
By understanding what makes your business attractive, preparing it for sale, marketing it effectively, and showcasing its strategic value, you can attract a strategic buyer who sees the true potential in your business and is willing to pay a premium for it. Remember, it’s not just about finding any buyer; it’s about finding the right buyer to take your business to new heights.
How to Mitigate Risk to Ensure a Smooth Transaction
Due diligence is an important step in mitigating risks during the sale process. By doing thorough due diligence, you can identify potential issues and address them before the sale, if you don’t mind. Warranty and indemnity insurance can also play a role in protecting both parties in a business sale. Additionally, clear communication and detailed contracts can help minimise disputes post-sale.
Conclusion
To maximise the value of your business sale, it’s crucial to think like the strategic buyers who dominate the headlines with major acquisitions.
From understanding what attracts premium offers to preparing your business for sale, each step plays a pivotal role in driving up the value and ensuring a successful transaction.
Whether you’re selling a small family business or a larger enterprise, knowing what strategic buyers look for can make all the difference. Highlighting its unique strengths and reducing the risks can attract the right buyer and achieve the best possible outcome. You might not be the biggest player on the field, but it pays to think like they do.
For expert guidance through the sale process, including attracting the right strategic buyer, contact Succession Plus today. Let us help you maximise your business’s value and secure the best possible outcome for your future.
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