How to attract acquirers in these uncertain times?
The current economic uncertainty is causing the Mergers & Acquisition market to slow down. But as in recent years, there is still plenty of money available to invest in the takeover of companies. Acquirers are still looking for companies that meet certain criteria.
In a first article, we referred to the importance of having a business with a future, presenting transparent numbers and having stability and continuity in the company. These key factors are important to convince potential acquirers.
To what extent is cash and a competent team important? How do I best present my business? How do I act as actual owner during the acquisition process?
"Cash is King", is an often heard saying but is certainly true in the context of an acquisition. The excess cash generated by the company annually is the parameter that will convince the acquirer to jump, or not. Will the excess cash be able to repay the financing within five to seven years, taking into account an own contribution of 20 to 30%? If not, the financing will probably fail, or the own contribution will have to be increased. "So, make sure you have a stable cash flow", Marc Van Damme argues.
If you have accumulated surplus cash in your business over the years, think about how you can reduce it. Rarely are buyers interested in taking over a "mountain of cash" that is not directly needed for running the operations.
Also check the state of your working capital. Make sure you have the optimal working capital and avoid serious fluctuations here as well. Remember, the fewer fickleness or uncertainties, the more comfort you give to your candidate acquirer.
"Make yourself as much as possible superfluous," Marc Van Damme states. "The less your company is operationally dependent of the shareholders, the better it often is for acquirers." Unless, of course, the acquirer has a strategy to keep the actual owner on board operationally for quite some time, but then the initial shareholder usually retains a minority or majority stake.
"Also surround yourself with competent employees and give them the opportunity to develop and take responsibility. Delegate. Make yourself superfluous...and put your key people first", is, according to Daniel Kroes, an important key to success.
Also make sure you have a realistic price expectation. Here it is crucial to take proper advice and to engage advisers who will not promise you "the sky is the limit". "Nothing is worse to put your company on the takeover market and it is quickly catalogued as too expensive. Your opportunity is then considered as burned and it's not easy to change that image with potential investors," Marc says.