What will attract a company to invest in your business, is it investor ready or are you selling a turn around opportunity, is your business investor ready? Naturally the price will be heavily impacted by the type of buyer your business is attracting. Financial investors are generally looking for a return on funds invested and an understanding of the risk. Strategic buyers generally invest in a business for many of the following key reasons:
- Attaining or maintaining a geographical advantage
- Expanding or enhancing existing product and/or service offerings
- Entering into new or related product and/or service offerings
- Reducing manufacturing, distribution and other relative costs such as overheads
- Achieving critical mass
- Generating additional distribution channels
- Gaining new clients or customers
- Realizing staffing improvements by gaining new professional and/or technical staff
- Eliminating or at least neutralising, competition (to the extent that is an objective)
- Technology and capabilities
- Enhanced reputation
The key objective for a buyer is however to increase shareholder returns, to create sustainable and reliable returns on funds invested. Experienced investors will quickly determine whether there have been reliable historical earnings (normalised or not). They will quickly understand the margins, employment costs and other key costs such as rental and facilities. Astute investors will quickly determine the weak points and risk points in the supply chain as well as understand what is your competitive advantage. Further they will also be exploring how much additional funds will need to be invested into the business to realise its full potential in addition to integration costs.
When pitching your business sale are you able to clearly and easily articulate the opportunities for potential buyers as outlined above and are you able to demonstrate that the business is capable of sustaining and growing its earnings? Is your business investor ready for targeted trade buyers or financial investors. Naturally it is difficult to know the strategic reason and motivation behind every investor however through engaging appropriate advise and M&A Services, you can develop a plan, if necessary undertake some changes and get to a point where your business is investor ready.