In part one of this two-part blog series, we looked at a couple types of business buyers who may show interest in your business if it's been listed for sale. Knowing the kind of buyer you're dealing with will often be very helpful for completing a sale, allowing you to understand motivations and craft a deal setup that makes sense for both parties.
At Utah Business Consultants, we're happy to help clients with a wide range of business sale services, from listing your business and determining a proper exit valuation to engaging with buyers and more. What are some of the other most common buyer types you may run into, and how can you make your business attractive to them? Here's a primer.
Private Equity Buyers
A growing number of businesses are being bought by private equity firms in recent years. In most cases, these firms are investing other people's money, which means they're under pressure to deliver a return on investment (ROI) within a set amount of time, typically three to seven years.
To achieve that goal, the firm will likely seek to do one or more of the following:
- Increase efficiency within the company by implementing changes to streamline operations
- Expand the business through new products, services, or geographic markets
- Improve profitability by growing revenue and/or reducing expenses
Ideally, the firm will also have a plan in place for eventually selling the business at a profit.
As the seller, you may be able to negotiate a higher purchase price from a private equity buyer than from other types of buyers, but you'll also likely have less control over the business post-sale.
In other cases, buyers known as "turnaround specialists" may be interested in your business. These buyers are typically looking for businesses that are underperforming but have the potential to be turned around and made profitable again with the right changes.
Turnaround buyers typically have experience in identifying and correcting the specific issues that are holding a company back, whether it's poor management, outdated processes, or something else. They may also be more willing to take on businesses in industries that are struggling overall.
One thing to keep in mind with turnaround buyers is that they're usually more interested in the business itself than the existing management team. As such, you may be asked to stay on for a period of time to help with the transition or may be replaced entirely.
Finally, this category refers to buyers who have already bought and/or started their own businesses in the past. This means they likely have a good understanding of the process and what's involved, as well as access to the capital needed to complete a purchase.
Sophisticated buyers may be interested in your business for a variety of reasons, including new market opportunities, a desire to expand their current operations, or simply because they think your business is a good investment.
One thing to keep in mind with sophisticated buyers is that they may be more likely to lowball you on price, since they understand the process and may be more confident in their own ability to turn the business around. It's important to have a good grasp of your business's value before entering into negotiations.
For more on this, or to learn about any of our business sale services, speak to the team at Utah Business Consultants today.