Many successful entrepreneurs are looking for accelerated growth in sales and profits. One of the most attractive options is growth through acquisition. Among the advantages of acquisition are the following:
- Buyers often look for companies of a certain size; if YOUR company is a sizeable one, it will be more attractive to potential buyers.
- In a given market, a larger company will command higher multiples.
- A company with a larger market share is able to negotiate better terms with suppliers.
- A larger company can afford better marketing and R&D budgets.
- In a context of labor scarcity, larger companies are often more attractive to employees… they can offer better employment conditions.
Entrepreneurs are often experts in their field; they know their products, their markets… that’s why they’re successful; but when the time comes to buy a new business… they often need help.
- What is the acquisition strategy?
- How much to pay?
- How do you integrate the new company?
An M&A advisor with a proper mandate can be invaluable in ensuring a successful transaction.
For the process
The advisor is “immersed” in the day-to-day business of buying and selling companies. They work according to an established process and call on the right people (accountants, financiers, lawyers) at the right time.
For research
A very large number of transactions involve companies that are not on the “for sale” market. Finding the right target that matches your growth objectives requires time for research and contacts… time that the entrepreneur and his team don’t have.
To negotiate
The advisor has seen many transactions. He’s in a position to consider many factors, including price, of course, but also other terms and conditions that may favor a transaction.
Confidentiality
Initial approaches are made anonymously, under the seal of confidentiality. The targets approached don’t know who the broker represents, which makes for a fairer process for both parties.
For pre-qualification
The broker verifies that the target meets the buyer’s criteria. Neither the seller nor the buyer has time to waste on a transaction that will never take place. Prequalification is the basis for further relevant discussions.