For many company owners knowing that they are engaging with the right acquirer for their business is as crucial a question as ‘how much is my company worth?’ While it’s possible to strike it lucky and stumble upon a perfect acquirer, sellers often end up with acquirers that won’t finish the race, because they’ve simply not invested enough time and effort in helping themselves understand what the right acquirer might look and feel like – both for themselves and for the team who will remain within the business.

The question is however can you ever know with any certainty that you’ve found the right acquirer for your business? All things being equal, we believe you can by asking the questions below:

First and foremost, can they afford you? The financial profile of the acquirer is a key indicator of their capacity to buy your business. This in essence means scrutinising all the available data on the acquirer’s company, including their financial information, or that of their parent company or related parties/companies.

For example, does the acquirer need to rely on an institutional lender, such as a bank to complete the transaction, or are they able to fund the deal themselves? It’s not unheard-of for sellers to end up being asked – either directly or indirectly – to support the acquirer’s funding arrangements to help secure a deal. Quite rightly, most owners are reluctant to accept deals requiring charges against their assets or tied to the future profits of their business simply to let someone else buy their business.

Secondly, what is the actual structure of the deal on the table? Often the terms of the deal and structure of the offer are an early indicator of the viability of the buyer. Some deal structures can be the ‘stuff of nightmares’, with sellers signing up to sale agreements without even knowing ‘when’ they will be paid, or if the deal value promised in discussions will indeed be the final agreed amount.

Steve Barry, Senior Client Director at Evolution CBS, comments:

“Some sellers may be faced with a deal structure weighted in favour of shares in the acquiring ‘Newco’ or Special Purpose Vehicle (SPV) specifically created to complete a deal – rather than cash on completion. This in itself may be completely acceptable in some sectors such as the Technology Media & Telecoms world, where innovation can drive higher future returns – in other circumstance a sensible seller might quite rightly exercise their right to object / reject a deal structured heavily on that basis. However, the temptation to accept a ‘bad deal’ can be overwhelming, especially if the acquirer at table is the only show in town.”

Another key question is, how proactive is the buyer? The speed at which the buyer proceeds, the pace of discussions, the questions asked and commitment to ‘relationship-building’, are all encouraging buying signals.

Deal fatigue is also a well-recognised feature of selling a business and if not managed properly it can result in a deal collapsing, leaving both parties financially (and in the case of the seller, emotionally and potentially commercially) damaged.

Importantly, once lawyers are engaged in the latter stages, an acquirer should take the initiative and drive the deal forward during the due diligence process.

Mike Whittle, Managing Director of Evolution CBS, comments:

“Often issues that crop up during the due diligence process, however minor, can set the opposing lawyers at loggerheads, which can introduce a tremendous amount of delay. Whether it’s a legal or commercial issue, a serious acquirer will ensure the process progresses at pace, promptly dealing with ‘red flag’ issues so you are not left in limbo and wondering what happens next.”

Lastly, one regularly overlooked, but extremely important issue is the cultural fit of the acquirer’s business with your own. Not only could this be frustrating if the fundamental business practices or management style of the acquirer’s organisation means there is a disconnect between the ‘new’ and the ‘old‘ worlds, but for many business owners this is a problem which goes much, much deeper for the people in the business which the vendor will leave behind. The culture of the acquiring company should be complementary to their existing business, creating a stronger entity post-integration. For example, a recent EvolutionCBS client went to market, deliberately seeking an investment partner who not only valued their distinctive ethos, attitudes and commitment to quality, but also shared their passion for improving healthcare outcomes.

EvolutionCBS Senior Client Director Steve Barry, who led the deal, commented:

“From the outset it was clear we could create the competition we needed to ensure we achieved our client’s financial goals and objectives. Finding interested acquirers was the easy part. Much more challenging was finding a partner who was not only prepared to invest in the business, but who could also share their very distinct vision for the future – and be prepared to live by the values and beliefs which had become the hallmark of our clients’ business.

With the successful investor that’s exactly what we found – an investor who could immediately see the potential for growth and expansion across and within their existing portfolio of businesses – and who recognised the unique values and characteristics in our client’s business which had made them so successful to date. As critically, they were committed to preserving those values for the benefit of the broader expanded Group – and in the end it was their vision and enthusiasm for building that combined future together that made them such a perfect partner for our client.”

Crucially, if you are expected to work in the acquirer’s organisation as part of a hand over – or if part of your deal is tied to the performance of your business or deferred for some time in the future, the cultural fit of the businesses could have serious financial and emotional consequences if you don’t get it right.

Being mindful of the above, you must embark on a sale with the strongest possible footing. Whether your buyer is a PLC with a strong market capitalisation, a cash-rich company, or one of the multitude of financial investors you’ll find looking to invest in exciting, well established and/or high growth businesses, the right advice (expert financial analysis, commercial desk research and world class negotiation skills) should help you not only find the right buyer, but also secure you the best possible deal.

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About EvolutionCBS

EvolutionCBS is a long-established, premium provider of business sale advisory services with an enviable track record of international transactions. We work with the owners of UK businesses in any sector and any region, finding buyers from around the world through highly targeted research and supporting our Clients with dedicated Director-led teams, at every stage of their journey to a successful sale. https://www.evolutioncbs.co.uk