As we discussed earlier, sellers should be prepared to deal with either a financial buyer, who views the acquisition purely for its potential return on investment, or a strategic buyer, who views the acquisition as having potential to enhance an existing business.
MARKETING TO A STRATEGIC BUYER
If the seller has the opportunity, he or she is often better served by marketing to a strategic buyer. A strategic buyer may view the business as an opportunity to eliminate a competitor, expand market share, or roll out a new product or service line. If your business is an important piece in the buyer’s strategy, the buyer will recognize that value and pay a premium. In addition, strategic acquisitions often have intrinsic value such as increased sales, cost savings, and financial efficiencies.
MAXIMIZING THE SALE PRICE
Anticipating and selling the potential synergies for a strategic buyer should be part of the seller’s due diligence process when entering into negotiations. Naturally, sellers want to maximize the sale price by factoring potential synergies into the valuation process, while buyers would prefer to price the business as a stand-alone acquisition. Accordingly, the seller should consider the value of the company from both perspectives. As the saying goes, knowledge is power. Engaging in proactive thinking to identify potential value to a strategic buyer will empower the seller in negotiations with the buyer and will likely improve the seller’s bottom line when determining the final sale price.