Who Are the Buyers?
There are three general categories of buyers in today’s marketplace: the Individual Buyer, the Financial Buyer and the Strategic/Synergistic Buyer.
The Individual Buyer:
This type of buyer is normally a small business buyer, looking for a business with a value range of $100,000 to $1,000,000. This buyer is typically buying or replacing a job…leveraging talents, skills and abilities to make more money and to build personal equity. Individual buyers want to control their own destiny. In today’s market, this buyer has possibly been downsized by a corporation or has grown tired of working as an employee. Pride of ownership will play a large part in this buyer’s decision process.
The Financial Buyer:
This type of buyer can either be an individual or a partnership, but of substantial means. Rather than buying a job, this buyer is seeking a return on investment. With experience in business, this buyer is usually comfortable with financing, generating revenue and cash flow. This buyer has a keen eye for reviewing financial statements and tax forms. Because of their backgrounds, Financial Buyers normally seek businesses with values of $1,000,000 or more; growth industries are of particular interest. Private equity groups fit into this category…they may or may not manage the daily operations, but they offer expertise to the management team in order to maximize the business’s success. For a private equity group, the target company normally generates more than $1,000,000 in EBITDA, has a defensible market niche, solid history
The Strategic/Synergistic Buyer:
This buyer is normally a company buying another business in order to increase market share, gain new technology or distribution channels, or eliminate competition. This buyer usually will pay an acquisition premium (over and above the stand-alone fair market value) if there are enough synergies from the acquisition. These buyers will normally target specific firms to acquire based on their needs. While they seek profitable firms, they will, at times, consider turn-around situations because of the depth of nuanced expertise they can bring to the acquisition. Depending on the size of the Strategic Buyer and its needs, the value range of the target acquisition can be from $500,000 and up.
Overall Buyer Characteristics:
Today’s buyers are smart. They are well-researched; they know the marketplace, they know how to review company records, they know what it takes to conduct a successful search for an acquisition. Many have created business plans to more clearly judge how a potential acquisition will fit into their future. They are internet-savvy; the Web is often their key source of information when seeking businesses for sale. They know that, because the acquisition market is often a rapidly evolving market, the race will go to the buyer who is persistent, prepared, financially-qualified and ready to act quickly. Buyers know that the best businesses are often sold before the listing hits the marketplace.
Our firm requires all buyers to submit a financial disclosure or provide appropriate information about their company/entity and execute a confidentiality warranty before any private information about a seller’s business is presented to the buyer. We practice strict confidentiality procedures to safeguard our clients’ business information.