How do you attract potential acquirers in these uncertain times?
The past few years have usually been very good for shareholders who have sold their company. Cheap money and a high number of potential acquirers meant that takeover prices were usually on the rise, even in times of corona.
The economic uncertainty that is now looming due to rising interest rates and commodity prices, the stagnant supply chain, the war in Ukraine and the technological transition in many sectors make company owners wonder, if "now' isn't a good time to sell their company.
"To answer that question", says Daniel Kroes, Partner at RSM Transactions, "the current business leader should ask himself the question: What does a potential acquirer looking for when acquiring a company? In other words, try to put yourself in the buyer's shoes and look at your business from that angle." Apart from the activity of the company, there are a number of elements that you should keep in mind, if you want to attract buyers for your company.
A business with a future
For some sectors it is "obvious" that they have a future. Companies active in digitalisation, healthy food, energy and the green transition, energy-saving investments/renovations, .... normally have a prosperous future.
"There are also many other sectors that are less attractive at first sight,” says Marc Van Damme, also a partner at RSM Belgium 1 Transactions, “but can still raise the interest of potential buyers. Important is to to demonstrate growth every year”. In addition, drawing up budgets and having a business plan that provides insights into the future of the company can be extra convincing. “Unfortunately, we find that some SMEs pay too little attention to this aspect when they consider to sell their their business," Marc confirms.
"The figures reflect the business", is a very important element to convince acquirers and create the necessary trust. "It happens with every acquisition that corrections are made to the figures to show the real EBITDA. If these are communicated transparently from the start to the potential acquirers, this is almost never an issue, if they are well-founded." explains Daniel.
It is better, of course, to separate private and business matters as much as possible from each other. Intertwining them too muchwill only complicate things unnecessarily. So reduce these "techniques" in the last years before the takeover.
If, as a shareholder, you also have a good knowledge of your own figures, this will certainly help the takeover process during discussion with candidate buyers. On top, it gives a professional impression to potential acquirers.
"Make sure the figures are predictable. Taking over a company is already risky business. Every aspect that can reduce the risk is welcome to the acquirer. Being able to present stable figures year after year certainly helps here," Marc confirms.
Demonstrating that you have a stable and reliable team is certainly a strong advantage. Long-term customer and supplier relationships are also an important asset in many ways. Only if the relationship is "too personal”, it will be considered as risky by potential acquirers. Therefore, make sure that in the last years before the takeover, you organise yourself in a way that you take some distance and delegate them to your employees.
"Keep your investment level in the last years before the transfer at the same level as before", says Daniel Kroes firmly. This is a strong signal to buyers that you believe in the future of your company. Besides, if you don't, this will be deducted from the takeover price.
"We often notice that the 80/20 rule applies to SMEs. 20% of the customers are responsible for 80% of the turnover," continues Daniel. Paying attention to this and trying to be less dependent on a few customers or suppliers will certainly help the acquisition.