by Terry Stidham, President of Target Search Group
How many times have you said or heard it said, “If we had known that company was for sale we would have bought it or at least tried to buy it" or "Why aren't we getting more targets to look at"?
The fact is that the vast majority of business owners who would like to sell don’t want it known on the street that they are for sale. The business owners would prefer for a premium or strategic buyer to identify who they are, prove that they have the intent and means to buy and then to enter into serious discussions as to what they would like to accomplish.
Simple enough, Right?
I often get requests for my advice on something along these lines; “Our Company is looking to grow through acquisitions. I have used business intermediaries and we have an in-house person or team that is tasked with finding companies. What other options are available to us? We are not getting enough of the “right deals” to look at without too many strings attached. We have very specific requirements as to the size and geographic service area of the company we would be interested in purchasing. Efforts so far have not had very many positive results. Any suggestions or help would be appreciated.”
Strategic Buyers, Private Equity and VC firms are all faced with the challenge getting enough of the “right deals” to look at and to ultimately buy or invest into. The “right deals” are the ones that are aligned with the investment objectives that fit the strategy, size and focus of the investor.
Strategic Buyers, Private Equity and VC firms are all faced with the challenge getting enough of the “right deals” to look at and to ultimately buy or invest into. The “right deals” are the ones that are aligned with the investment objectives that fit the strategy, size and focus of the investor.
Having spent the last 15 years sourcing deals, I can tell you that without a doubt that there is no shortage of quality companies to buy or to invest into. Below the waterline is where one has to go to find them. The outlook for targets to acquire looks extremely good as the baby boomers, who currently own over 60% of the businesses, continue to seek an exit in increasing numbers.
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." Warren Buffet to his share holders in 1989
The Majority of Deal Flow is being sourced from:
- Brokers or Intermediaries
- Web Sources
- In-house Business Development Teams
- Networking
- Referrals
This may be adequate for the very large players that have dedicated resources to source, review and scrub enough opportunities to meet their investment objectives. The numbers and the amount of dry powder tell us that for many this is simply not the case. Most strategic buyers and investors that are looking to grow through acquisitions may at best have a person or two that is assigned with the task of sourcing deal flow.
- Approximately $900 Billion with private equity firms
- Strategic Buyers (non-financial companies) with over $1 Trillion
“Insanity is To Do the Same Thing Over and Over Again and Expecting Different Results” often attributed to Albert Einstein
Investors that are not meeting their acquisition/ investment objectives need to initiate or increase their Business Development efforts - either through in-house efforts or outsourcing it to a business development and deal sourcing specialist firm.
Advantages are exponential for the following reasons:
- The Deal is Typically Un-shopped
- Majority of the Quality Deals are Below the Waterline
- Avoidance of the Auction Process
- Committed Sellers
- Quicker Closings
- Confidentiality is Easier to Maintain
- Less Time Wasted on Deals that are Unaligned
- More Cost Effective
Successful business development to source proprietary acquisition/ investment opportunities involves being able to:
- Speak the Language of Both the Buyer and the Seller
- Segment Markets
- Identify Targets
- Establish Lines of Communication
- Gather Base Level of Information to Determine Suitability
- Get Level of Understanding as to Owners Initial Expectations
Call or contact me with your questions of comments.
About the Author: Terry Stidham is a Sales and Business Development Leader with extensive knowledge of the M&A process, combined with an in-depth understanding of the constantly changing global capital markets environment. He has served as the head of entrepreneurial organizations as well as Fortune 500 companies. He specializes with mid-market companies in a diverse array of industry sectors from service and manufacturing to technical and professional firms.
Mr. Stidham speaks the language of both the seller and the buyer having vast experience on both sides of the transaction. He has been directly involved in the execution and successful closing of hundreds of investment banking and corporate finance transactions. Mr. Stidham has instructed thousands of business owners on how to prepare for a successful exit. He improves operational efficiencies leading to significant increased value.
About the Author: Terry Stidham is a Sales and Business Development Leader with extensive knowledge of the M&A process, combined with an in-depth understanding of the constantly changing global capital markets environment. He has served as the head of entrepreneurial organizations as well as Fortune 500 companies. He specializes with mid-market companies in a diverse array of industry sectors from service and manufacturing to technical and professional firms.
Mr. Stidham speaks the language of both the seller and the buyer having vast experience on both sides of the transaction. He has been directly involved in the execution and successful closing of hundreds of investment banking and corporate finance transactions. Mr. Stidham has instructed thousands of business owners on how to prepare for a successful exit. He improves operational efficiencies leading to significant increased value.
Logical and nicely written
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