A guest post from Dan Levinson, director and head of business intelligence at Chelsea Corporate Limited, and a specialist in providing expert business acquisitions advice.
Mergers and acquisitions (M&A) is the most interesting field of work in the world. Or so my business partner tells me. But in all honesty, he's probably right. What other line of work allows for involvement in so many different industries at once? From electrical contractors to publishing houses, and aluminium manufacturers to IT support service providers, a seasoned M&A practitioner has probably experienced it all.
With the number of businesses for sale in the UK revolving around 60,000 at any given moment, M&A practitioners form a vibrant and crucial network for mergers and acquisitions to transpire efficiently. We're able to mix and match sellers with buyers and buyers with sellers in the fastest and most effective way possible.
However, if there's one thing that is more important than our understanding of the various fields of business in the UK, it is our intimate familiarity with the myriad of ownership transfer models that today's market offers. Business buyers and sellers are often good at running their business, but they're not always familiar with the best ways to acquire or exit the business they want to run.
Just as there are many reasons and motivations for people to buy or sell, there are equally as many methods to conclude these deals successfully. At times owners want to sell their business but remain engaged in it, while buyers want the sellers to be involved for a few years for a smooth transition. Often buyers don't have the capital to purchase a business by paying one lump sum, while sellers are keen to receive payment and fully exit. Buyers and sellers, therefore, frequently need an outsider's assistance to make sure that the acquisition can happen.
So what are people's motivations? These are some of the typical reasons I when I talk to MDs, CEOs and business owners...
1. They have incredible businesses but they are bored by the slow organic growth.
2. They have a good sales department but they would like to rapidly increase their turnover.
3. They feel as though many of their competitors are struggling and they would like to take advantage of the situation but they are not sure how to approach without coming across too intimidating ...
In fact, M&A practitioners are able to pinpoint the underlying requirements that clients themselves are often unfamiliar with. This requires intimate knowledge of the M&A process from the very beginning, including what sort of financing is available and appropriate? When should a solicitor be engaged? How will the acquisition affect accounting issues? What is the relevant geographic region of searching for acquisition targets? How to deal with staff belonging to the existing and acquired businesses?
M&A practitioners can also provide access to a network of serial buyers, private equity firms, venture capitalists, and serial investors. Seasoned M&A practitioners will also have developed a significant bank of keen business buyers and entrepreneurs during their years in the field. These kinds of serial buyers require a deal flow that only a well established M&A practitioner can provide. So, if you're selling a business, you should seek their attention; and if you're buying a business, seek their retention.
It's important to note that M&A practitioners are not appropriate for everyone. We do turn away far more businesses than we take on. Prospects contact us at times with no clear strategy, no cash or funding and expect to solve these problems as they go along. We only take on buyers who are well funded, or are serious about letting us help them find the right funding avenue for them. Clients must know exactly what their unique selling points are, or be open for consultation in this area.
As an example, we did a deal with a manufacturing business where the owners were great technicians but they were not so good on marketing (by their own admission). It was clear that from an outsider's point of view that in finding the appropriate new owner, the very same business could see far greater success. Indeed, the buyer has turned the company around, using the sellers to manage the business, and his own marketing ability to increase sales. As a result, the sales have grown so much that they had to expand their infrastructure which, at the offset, was too costly for the production at the time.
Undoubtedly, buying or selling a business is a detail-oriented task. From the initial search to a deal's conclusion, an acquisition or sale takes much effort to complete successfully. On average, it takes ten introductions before a buyer makes an acquisition – making sure that these are the right introductions requires considerable time and knowledge.
Sure, a business owner could try searching for buyers or sellers himself, or even appoint an employee to scour the market for suitable matches. But if real results are important, and an efficient outcome is sought, engaging an M&A practitioner is imperative.
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