Selling my business – How to do potential purchaser research and how to I find the buyers?

Is it possible to find out who on a global basis is interested in buying your business, estimate what they are likely to offer and all this without telling anyone you are considering a sale. The answer is yes.

How you might ask? Well, it is not through the use of anonymous one pagers, but through the use of hard work, extensive primary research and some brainpower.

It is also possible to find out if someone will offer a derisory price and a load of people will come around, “kick the tyres” and try to steal your customers. This is what you will get from any process that claims to do research, but will stop at the point where they send out 200+ one pagers and see what comes back.

The two approaches might sound the same and you might even be convinced in a mass hard sell seminar that they are the same, but trust me they are chalk and cheese. The latter model is driven entirely for the benefit of your advisor, it saves the cost of expensive researchers, lessens the likelihood of a result for you, but maximises the chance of a result for them. This is because it enables them to commoditise what should be an exceptionally bespoke process and therefore act for vastly more clients with a smaller team. You are all business people, so what is the result? Well it’s a numbers game more clients, less cost means they can afford for many more deals to fall over and they still make money.

Here’s the tragic thing, the latter model dominates the industry to the point where only four to five midmarket players are actually invested in the quality model. At CFTV we would be happy to introduce you to all of the firms in the market that offer the quality model.

So how does this quality model or “covert auction” process differ in terms of research? You can watch a video description of the entire process Typical process when selling

Well it breaks down into the following stages.

1) Brainstorm pools of potential purchasers
2) Get the names of every company involved in all of those pools
3) Reverse gear with internet and paper research and reduce the list
4) When the list is honed pick up the phone and ask an open ended question
5) Review results and compile the report and finding.


1) Brainstorm pools of potential purchasers


Whilst many deals are done to the competitors of the target firm, most of the best deals are done to people outside the target firms market who pay a premium for a niche, a vertical or something the target firm offers that their business needs. So take time to consider, what verticals if any do you dominate, what niches do you dominate, what other factors are unique to your business or in rare supply? Also consider, what other industries are trying to break into yours or what geographic regions are moving to acquire in yours? You might also think if you have exceptionally strong client relationships, who else sells to them, they may be in completely different products or services, but if you offer a new product range to their vertical market they could pay a genuine premium for that.

These are some of the questions that you should answer in coming up with your potential purchaser pools. Once you have these pools you can move onto step 2.

2) Get the names of every company involved in all of those pools

This is a laborious, but straightforward job for the experienced analyst. You just need to work by pool and look at firstly and most importantly who have done deals in the last few years in that sector. You then focus on who has announced an intention to do deals (this may be easier if you own an internet TV channel focused specifically on finding this out in every sector). You then look at everyone else in the sectors by looking at industry conference attendee lists, trade body membership lists and SEC codes on general research databases. The subscription to databases necessary to get some of this information is tens of thousands of pounds, but any credible firm will have these already and will pass on a nominal cost for use on a project.

3) Reverse gear with internet and paper research and reduce the list

This is very time consuming and the bit that most firms just skip in favour of telling everyone you are for sale through the “anonymous” one pager. It involves looking at every firm in a little bit of detail and thinking about whether they are big enough, have an intention to do M&A at all or what their strategy is. Even if you spend 10 minutes per firm it takes weeks to go through to 2-300 companies, it is much easier to just breach your confidentiality. At the end of this stage you will have 50-60 contenders.

4) When the list is honed pick up the phone and ask an open ended question

This is the really difficult and arduous bit. All the remaining companies get called and asked the question “what are you interested in buying?” By asking this open question you can find out genuinely what they are interested in, you can lead a little but be sure to obfuscate the point. What I mean by this is you can ask directly about your clients sector if you ask about and listen to all of the other sectors that they are interested in with equal attention. Protecting your clients best interests is not easy but it is worth it. You can hone in on deal size by asking, “what is the smallest and largest deal values, turnover and profit you would consider?”. Again this is far easier to achieve if you also own a media channel that has the business of finding out market information and knows a lot of these companies.

At the end of this stage you have typically found 10 strategically interested companies that are the key buyers for your business. You have considered the entire market in detail and missed nothing you have zero possible breaches of confidentiality and you have the best chance of the highest price. You have expended weeks of time on research but that all has value as you understand the entire potential purchaser landscape which really prepares you for the negotiation phase later in the process.

5) Review results and compile the report and finding.

So why doesn’t everyone do this. Well because a qualified analyst is an experienced business person and is not cheap. This is an exceptionally time consuming and committed job and takes them 4-6 weeks full time to do properly. It is far easier to stop at step 2, which takes a few days and just send out a one pager to 200+ companies. Who cares if the client is damaged by this appalling and unnecessary breach of confidentiality, there are plenty of clients as long as a few go through the firm will make money. The thing that really irritates me is that some large firms in the market actually persuade clients that sending out 200+ one pagers is a virtue of their process and helps the client rather than what it is cynical laziness putting profits ahead of principles.

Ironically the 4-5 firms that do it properly are highly profitable and have excellent reputations and awards. But if you are new to the industry as most clients are, how would you know the difference? Well that is what CFTV is here for “safe and accessible, education and help for wealth creators”.

 

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