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Why Professional Buyers Contact Sell-Side M&A Advisors

By Generational Equity

04/02/2018

Merrill Corporation, a leading resource supplier to the M&A community, recently published a study entitled, “2018 Corporate Development Outlook & Management Trends.” As you can imagine from the title, it focuses on information provided to them by professional buyers working for corporate strategics and the attention was on their M&A plans for 2018.

The data offered a detailed insight into how buyers are approaching their activity this year. As the majority of our readers are sellers of businesses, I share this in the hope that it informs your M&A strategy going forward with knowledge of what buyers are prioritizing.

Professional buyers investing in inorganic growth

One of the first questions professional buyers were asked in their survey was: “How are you going to be deploying your corporate development funds this year?” The overwhelming response (44%) said they would be investing in “inorganic growth” strategies.

For those of you not familiar with that term, it essentially means that they will be buying other companies in order to reach their growth goals rather than trying to grow the businesses from within.

This is a significant realization if you aim to sell a business in this year’s market. Corporate strategics are going to be very active and competing with private equity firms as never before to close deals. Again, great news if you are in the market.

What do professional buyers expect from M&A advisors?

A second compelling question they asked was: “When you hire an M&A advisor, what service is most important for them to provide you?”

Keep in mind that these are not rookie business buyers. Many of these folks are very experienced dealmakers for their companies, closing, in many cases, dozens of deals a year. But in most engagements, they do hire buy-side M&A advisory firms to guide them. (Note: Generational Equity is solely a "sell-side" advisory firm. We ONLY are hired by and work for sellers. This information is being provided for you so you can see that if professional buyers hire advisors, so should sellers).

So why do buyers hire them? A significant percentage of respondents (28%) said that the primary reason they hire buy-side advisors is for sourcing potential opportunities, a.k.a. helping them to find targets to buy.

This reason is why professional buyers we talk to regularly keep telling us the same thing: They simply do not see enough good targets to acquire!

They struggle with finding enough businesses to look at, and this is where Generational Equity can help you, the seller. We connect business owners with buyers who, in many cases, are now willing to pay a premium for well run, profitable, middle market companies.

The key point here: Generational Equity solely focuses as a sell-side M&A firm. We never take any payments from buyers; we only work for sellers. However, because buyers we work with know we are a great source of salable companies, they come to us in droves. In fact, we have over 34,000 registered buyers in our proprietary buyer database who have told us exactly what they are interested in seeing in their targets.

Why do professional buyers find Generational Equity sellers attractive as targets?

Two key reasons:

  1. Our upfront commitment fee ensures that the business owner is motivated to sell
  2. Our initial step is a full evaluation of the seller’s business, which includes an estimate of business enterprise value (BEV) – giving sellers realistic expectations of value

Both of these are equally important. Many business brokers do not require a commitment fee upfront to cover their initial costs. Subsequently, the seller can back away at any time and refuse any offer. Generational Equity’s approach helps buyers avoid wasting time on negotiations with sellers who aren’t committed to exiting.

Secondly, our clients have legitimate valuation ranges that we provide them so that when offers come in, they don’t ignore them based on value expectations that are founded on nothing but vapor.

These are two key points why business buyers like to work with us and reflect the reason why buyers also hire M&A advisors: They need professional guidance as well, especially in sourcing good sellers.

We appreciate Merrill giving us insight into the mindset of corporate buyers as we move through 2018. We hope that you have found this info enlightening as well. If so, and if you own a business and do not have an exit plan in place, we invite you to attend a Generational Equity exit planning conference soon.

Held throughout U.S. and Canada, these meetings provide business owners with incredible insights on how professional buyers think and operate. An investment of your time could pay off dramatically. Don’t just take my word for it, listen to what a few of our clients have told us about our conferences:

To find out how you can attend one of our meetings, please use the following links:

By Carl Doerksen, Director of Corporate Development at Generational Equity.

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