8.5 minute read
The “perfect” trade sale – is a fuss-free, maximum value, strategic trade deal with buyers that just “get it”. Yes, this is great in theory, but how can you achieve it?
The Right Stuff
Preparation, timing, and process all have a bearing on achieving the “perfect” trade sale, however, strategic buyers will be most influenced by your financial results and presentation – but this needs to comprise of the “right stuff”. Ultimately, the “perfect” deal is achieved when you can demonstrate that your business is unique in a growth sector, is difficult to replicate, has a great retainable team and has a strong track record and forecast of growth and change. It is the “right stuff” which then creates the “we want, we need” motivation that drives the deal.
The Four Corners of M&A
The trade buyer that secures the four corners of M&A will always be the highest bidder. These are economies of scale, synergy, disruption, and shareholder value. Securing several offers either against a guide or on an offers basis only in an auction is by far the best way to secure the most motivated buyer. Therefore, presenting “the right stuff” to the right buyers is central to the “perfect” trade sale.
This takes exceptional research and analysis backed by determined and well-positioned multi-channel approaches to ensure you get beyond the gatekeepers to the right decision-makers and make them aware of your opportunity for sale or investment. Such research requires a dedicated team with experience, global database resources and analysis skills – and increasingly in a noisy world – the mark-tech capability to ensure that interest is reached discreetly and secured absolutely.
Confidentiality should be carefully managed, and buyers assessed in detail. Different buyers will have different motivations and all information flow should be focused and bespoke, where appropriate.
Stand-Out in the Blue Ocean
If you look like your competitors, you will not stand out and buyers will have a choice, thereby driving the value of your business down. If you can own a niche within a niche, you create barriers to entry and therefore again demonstrate that you are “made of the right stuff” to secure the perfect trade sale. This is when buyers are forced to acquire you to ensure market share and or market entry into new “blue oceans”, thereby creating and capturing uncontested markets, making competition less relevant and boosting margins.
With ‘blue oceans’ the conversation is also less about profit and return. Whilst Android made no money at the time of Google’s purchase for circa £50 million it has since delivered huge returns. Their estimated smartphone market share is a huge 85% as Google had the vision and synergy to make Android a market leader in a relatively “blue ocean”.
You Cannot Kid a Kidder
The “perfect” trade buyer will themselves be ultra-savvy. They will know their strategy, positioning and strategic drivers inside-out, forget persuading them but you can influence them. By studying the prospective acquirer’s strategy and their game you can position yourself to bolster their weaknesses and play alongside their strengths, thereby enhancing your prospects.
You cannot, however, oversell to them as the buy-side will see that the enthusiasm is not backed by a strategic fit, nor the empirical data to prove that fit. Presentations must be done with (deep roots – data) and firm footings (track record and facts). You simply cannot kid a kidder that is an ultra-savvy trade buyer. Stick to the facts and prove you are made of the ‘right stuff’ quickly and clearly.
What’s the Plan?
Buyers want growth and if you can demonstrate your business’ prospects, backed by research, this will drive buyer motivation. Having a clear, achievable plan for growth also creates leverage, as you can demonstrate to buyers that the value is only going to go up and that you can choose if you want to do a deal or retain and grow the business. Do not rely wholly on the trade buyer having a plan and be willing to adapt the plan for the combined entities.
Be clear on the handover and cultural fit as the deal is often only the start of the next journey to the “perfect” trade sale. That is, where the buyer achieves the value that they have sought to secure with the acquisition. Sharp Plc in the UK were mainly focused on business machines and when they acquired Complete IT. With Avondale’s advice, it was agreed to hold the acquisition at arms-length to maintain the culture and gradually build the synergy over time rather than distract two very separate cultures by trying to cross-sell overnight. The right post-deal plan is essential to ensure value for both sides.
Effective negotiation is the difference between success and failure for a “perfect” trade sale. Leaders may be naive in the assumption that transactions are all about price – but this is not the case. Culture, integration, risk allocation, payment structure, funding and timetable all form integral parts of the deal equation. Integration of all the elements is a key part of maximising value beyond the price. The combination of the right advisors and the time to spend anticipating are essential.
Delivering the deal
The process is also critical – sign yourself up with a great M&A team who will lead from the front. Be clear on roles, agree on timelines, stick to a schedule and communicate. Be collaborative with the buyers. You may have the opposite agenda regarding price but in all other respects, you are working toward a mutual goal. The approach is to avoid attrition on deal value through transparency and to shape the deal around any challenges.
So, the perfect trade sale requires crafted research to find the buyer that just gets what your business is made of and presents the “right stuff”, care in the delivery of both the sale process and auction and a good post-sale plan. Positive disruption is by far the biggest driver for the “perfect” trade sale – that is, finding a buyer that shifts markets via the synergy and changes its overall positioning by creating more pull in its brand and client base through the acquisition.
Avondale is a leading business sales advisor that helps ambitious owners buy or sell companies, secure investment, grow their business and enhance shareholder value. Audacious, authentic, and ambitious partners of exceptional quality, delivering your success. We have been advising dynamic entrepreneurs and companies for almost 30 years, both locally and globally.
If you are looking for advice or an exploratory discussion without obligation for your “perfect” trade sale, please contact us at +44 (0)1737 240888, our Contact Us page or email us at firstname.lastname@example.org for further information. Alternatively, download our The Perfect Trade Sale insight HERE.