We have chosen the theme of identifying our counterpart in a financial transaction. What makes a good “match” between a buyer and a seller?
After careful consideration, we will divide our criteria between the quality of the match and the quality of the transaction. In our opinion, the match between the parties should be on two dimensions – time and strategy.
Time is easy to identify: if a buyer is ready now but the seller does not want to proceed for another 3 years, we will not move towards a transaction. Time also includes the ability to complete the transaction in a reasonable time frame: availability of a team (internal and professional resources), financing capacity, and other factors.
Strategy is more complex to align. Some of the questions that need to be asked are:
- Are the vendor’s operations complementary to the buyer’s and how will the latter benefit from these operations?
- Is it a better geographic location, a better terminal or manufacturing site?
- Is the product complementary?
- Do we want to add capacity in people, square footage, or equipment?
- Is it the right size? Is it the small fish that wants to buy 10x bigger?
- Will the vendor’s customer base allow the acquirer to approach new markets with their existing operations?
Once we have the reasons for a deal in terms of timing and strategy, we examine the terms of the deal:
- Do we arrive at a reasonable price for both parties?
- Are the transition terms suitable?
- Do the business values between the two organizations match – this will facilitate the transition and reduce the impact of human resources losses.
Don’t hesitate to ask for support when selling or buying a business. The process is complex, and even when you have the internal capacity to work on these issues, an outside eye can help, either by providing a fresh perspective or by helping you accelerate the process.