Business Sales: The Marketing and Contact Phase
Find the right buyer, and present yourself in the right way
After the preparations are complete and the company is ready to take the next step in business sales it is time to start the marketing and contact phase where potential buyers are contacted. Strategically identifying and contacting the right buyer increases opportunities for competition among buyers and ultimately a successful business sale.
Identifying the Right Buyer
In cases where the seller wants to contact more than one buyer, which is often recommended, a thorough buyer analysis needs to be carried out. This means that potential buyers within different categories are identified and evaluated. The objective of the analysis is to find potential buyers or investors deemed to have the best strategic fit and financial capacity to execute a transaction.
Different categories of buyers
In the case of a business sale, different buyer categories should be analyzed along with the pros and cons of each category. Examples of buyer categories include:
- Strategic Buyers: Companies in the same or related industries that intend to expand their product offering, take market share or expand geographically. They may be willing to pay a premium for synergies and long-term strategic fit.
- Financial buyers: Financial buyers include venture capital companies, investment companies, family offices and other financial institutions that acquire companies primarily for the purpose of growing and refining the company and then reselling the company with a return on investment. That type of buyer often has a short or medium investment horizon.
- Industrial buyers: Industrial buyers include companies that intend to diversify operations by acquiring companies in related industries. These buyers are often interested in improving their market position and creating operational synergies.
- Individual buyers: These are individuals with significant capital acquiring companies. Individual buyers can be both active or passive owners after an acquisition.
Each buyer category has different drivers, and it is important to understand these in order to optimize the sales process and conditions.
Strategically Rational
Finding buyers who have a strategic rationale for an acquisition means identifying companies or investors who would benefit from acquiring your company. These can be companies operating in the same industry, companies looking to expand their product offerings, or investors looking for growth opportunities in the sector. A strong strategic rationale often means that the buyer is willing to pay a higher price, as the acquisition can create synergies or open up new market opportunities.
Financial ability
It is also crucial to ensure that the potential buyers have sufficient financial headroom to be able to execute the deal. This includes not only the ability to pay the purchase price, but also to have the resources to further develop and integrate the acquired company into their existing business. An evaluation of the financial strength of potential buyers reduces the risk of the deal bursting at a later stage due to a lack of financing.
Information material: Teaser and information memorandum
After the buyer analysis is completed and potential buyers have been identified, the next step is to create information materials with the aim of attractively presenting your company to potential buyers. This material has a central role in generating interest in potential buyers, and thus should be both informative and persuasive.
Teaser: A teaser is a concise document that provides an overview of the company, often without revealing its identity. The teaser aims to arouse the interest of potential buyers and give them the opportunity to assess whether it is interesting to move forward in the process.
Memorandum of Information: Potential buyers who have an interest in receiving additional information then sign a non-disclosure agreement, after which a more detailed document called an information memorandum is shared with the respective potential buyer. This document is comprehensive and provides an in-depth insight into the company. It includes details about the company's operations, organization, product offering, market, competitors, financial position, and future growth opportunities. A well-written information memorandum helps potential buyers get a clear picture of the company and how it could fit into their existing business.
Buyer contacts
After the relevant buyers have been identified and the information material produced, the next step is to enter into discussions with potential buyers. This phase requires experience and a strategic approach since the objective is to create a competitive situation between buyers, thereby maximizing sales conditions.
It is also important to carefully evaluate the interest and ability of each buyer to complete the deal. This includes assessing strategic objectives, past experience with acquisitions, and plans for how the purchasers intend to develop the company after the acquisition. Understanding the buyer's intentions helps to choose the buyer who not only offers the best terms, but is also most committed to continuing to develop the company in a sustainable way.
Negotiations and next steps
Once discussions have begun, and potential buyers have shown a genuine interest, the process moves to more formal negotiations and the receipt of indicative bids. This includes discussing specific terms of the deal, such as purchase price, payment structure, and any employment contracts for key employees. The goal is to reach a Letter of Intent (LOI) that clarifies the basic terms of the deal before initiating a deeper due diligence process. Whether negotiation should take place with one or more potential buyers depends on what is judged to be the most strategic at the respective time.
At FLB Partners, we offer expertise and support throughout the entire sales process, from the preparation phase to the completed sale. Contact us today to discuss how we can contribute to a successful business sale.
