We Source Prospective Arizona Business Buyers
Before beginning constructing a list of prospects it’s best to understand the objectives and considerations of the seller, the owner. An initial question of the seller is who are the company’s immediate competitors, how are their reputations, and would they make good buyers and would you sell to them.
The acquisition structure and transaction time demands consideration too. Does the seller wish to exit immediately, usually within 6 months of close; continue to run the company; or work under contract for a period of years? Would the seller be comfortable with an earn-out? Accept shares in the purchaser’s company? Or carry a seller note?
Then after understanding these seller considerations, we can begin aggregating a prospect list. There are three primary types of buyer prospects; equity funds, strategic company buyers, and high net worth entrepreneurs. Contacting each type requires very different methods and strategies. They each have different buying metrics or requirements. Also, the size of the selling company may dictate the best strategy and most probably type of buyer.
Private Equity Fund Prospects: These are great buyers for a business. They are ready, willing and able buyers. In other words, they usually are in the market seeking companies to acquire. They certainly have the will and often are required to ‘spend’ there funds. And, thirdly, they are able buyers with knowledgeable, experienced, well financed and most likely manage companies in your industry. In most cases the funds have specific target industries, segments and size requirements. For example, many limit their review of companies to those over $5 million in revenue and $1.5 million in EBITDA. The lower middle market ranges from $5 million to $50 million and sometimes to $100 million in revenues. We can source lists of private equity funds through M&A databases, source through business networks and associations, and source strategic companies.
Strategic Company Prospects: Much like the private equity funds, they too are excellent and viable acquirers. They too can be sourced through on line databases for purchase or subscription. Strategic company buyers also have revenue and EBITDA minimums and maximums. Strategic company buyers often are more flexible with their requirements, whether it be price, terms, cash or stock, owner contracts, owner earn-outs, and timing.
Entrepreneurs: These prospects represent high net worth buyers. They are the most difficult to reach. They vary in terms of suitability, capability and experience. They do offer the most flexibility in requirements. However, their readiness to purchase, experience, financing and capital may be stumbling blocks to close.
Reaching entrepreneurs is more of a passive approach. Usually listing the teaser on leading business sales web sites it the best approach, along with using these website to market proactively to their buyer membership.
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