•  
    In 2002, over 80% of public company M&A involved the acquisition of private businesses, with 70% of those deals involving companies with less than $25 million in annual revenue.1
     
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    Buyers purchase businesses to:
     
    • 1) Accelerate growth
       
    • 2) Satisfy market demand for additional products and services
       
    • 3) Expand into new markets
       
    • 4) Acquire market share or position
       
    • 5) Reduce dependence on a single
       
      • product or service
    • 6) Increase earnings per share
       
    • 7) Avoid risks of internal start-ups or expansion
       
    • 8) Acquire outstanding management or technical personnel
       
    • 9) Increase utilization of present resources (machinery, human capital, etc.)
       
    • 10) Offset seasonal or cyclical fluctuations
       
 

Myths of Private Company M&A

Identifying the best buyers of a business

Employees, family members and friendly competitors are typically NOT the best buyers of a business

  • It is a common misconception that those most knowledgeable about a business will pay the highest premium.
  • Often, however, premium buyers will come from unlikely sources, locations and industries.

Understanding types of buyers

  • There are two types of buyers, i) economic buyers , who are solely interested in generating financial returns, and ii) premium buyers, who recognize the strategic and financial merits of a transaction, and thus will be inclined to pay premium value.

Premium buyers pay PREMIUM prices

  • When assessing the purchase of a business, premium buyers look beyond mere economic value, and focus on the strategic and financial pro forma benefits of the transaction. The potential to accelerate strategic and financial goals is the driving factor that motivates premium buyers to pay premium prices.

Premium buyers are often from an outside industry

  • Premium buyers typically include large domestic and international publicly traded corporations seeking companies that facilitate their entry into new markets, offer product diversification or accelerate revenue growth.
  • With constant pressure from Wall Street to consistently and predictably grow earnings, premium buyers seek acquisitions to enhance their growth.

Aligning buyer and seller interests

  • Understanding and aligning the needs and wants of a seller and a buyer are of critical importance in a transaction.
  • It is important to properly understand the strategic and financial merits of a potential transaction early in the process. Equally important, a business owner should have a clear idea of governance and management succession requirements.

A business owner is typically at a disadvantage trying to sell his or her business

  • Many business owners believe that they are capable of properly and optimally executing the sale of their business.
  • For most business owners, however, the sale of their business is their first experience in an M&A setting. Buyers of businesses, conversely, typically have significant experience in negotiating, structuring and valuing transactions.
  • Business owners who attempt to sell their business on their own are almost always at a disadvantage when going up against seasoned deal professionals .

GW Equity's team is among the highest ranking M&A advisors

  • Our associates collectively have decades of experience executing the most successful M&A transactions. We maintain a powerful and expansive network of financial and strategic buyers. We help business owners seeking an exit to identify, qualify, select and successfully negotiate with premium buyers capable of paying maximum value.

1Source: MergerStat
 

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