Buyers for your company: How to build a great list?

by Steve Popell on June 14, 2010

In a previous post, we discussed the fact that becoming an attractive strategic acquisition candidate should begin with learning precisely what prospective buyers think that means, and how to elicit that information in a series of telephone interviews.  But, an equally important element is determining whom to interview.  This post will address that question.

The first, and most obvious, step in compiling a list of prospective buyers in your industry is simply to brainstorm with anyone who fits the following profile.

  1. Has a valid input on this topic
  2. Can be relied upon to keep totally confidential even the fact that there has been such a conversation.  The notion that your company is (or will soon be) for sale can be very destructive in the marketplace.

As long as you have complete confidence in the discretion of each individual, the more contributors the better.

The next step is to consult as many merger & acquisition databases as you can identify.  Database research can help in two distinct ways.  First, it can provide information on specific acquisitions.  Second, and as importantly, it can suggest matchups that might not have occurred to you and your colleagues.  Discussions that follow will often lead to whole new categories of prospective buyers.  The basis for this research is your company’s Standard Industrial Classification (SIC) code number, along with the parameters that are most relevant, such as:

  1. That the SIC code number relates to sellers;
  2. Period of investigation (e.g. last three years)
  3. Sellers’ annual revenue range
  4. Whether to include international buyers and/or sellers

When in doubt, do not leave out any parameter, or narrow it unduly.  It is far better to have too many data points than too few.  You can always drop any that prove to be irrelevant.

The rest of this part of the process is iterative; i.e. back and forth between brainstorming and database research, until you feel that you have reached the point of diminishing returns.   At that time, shift your attention to identifying a specific executive to interview in each company.  This information should be readily available on the prospective buyer’s website.

In a relatively small company, the CEO or CFO is the most likely choice.  In a larger company, there may be an individual specifically charged with acquisitions, such as the Director (or Manager) of Corporate Development.  Since the title will vary from company to company, it may be necessary to click on the name of someone you think may have this responsibility.  His or her write-up should be very helpful in this regard, and will probably provide contact information, as well.

Once you have developed the list of companies and individuals to contact, craft a questionnaire along the lines discussed in the previous post, conduct the interviews, collate the data and, finally, analyze the results.  The product of all this effort will be the profile of the attractive strategic acquisition candidate from the perspective of the marketplace.

Good luck.

PhotoPopell This article has been contributed by Steven D. Popell. Steve has been a general management consultant since 1970. Steve is a Certified Management Consultant, business valuation expert, and inventor of ExiTrak®– a process designed to assist the privately-held company owner/manager to build an attractive strategic acquisition candidate

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