Companies in the lower mid-market often are surprised when they attract attention from larger entities, even those whose balance sheets dwarf the target.
I moderated a panel discussion on Strategic Sales at the May M&A Source conference. The session looked at three case studies:
Why do small companies attract this kind of interest?
Large companies have difficulty innovating quickly enough to capitalize on trends. Two of the case studies were in sectors previously considered alternative but now considered mainstream: organic and gluten-free.
In an article in Food Dive, Carolyn Heneghan notes that consumer tastes are rapidly changing and popular brands are losing their luster to new products. Big food companies need innovation and sometimes find it more efficient to buy a company than start from scratch.
In the transportation company case study, the operator had developed deep inroads in a foreign market. The buyer group wanted to reach that market quickly. It was more productive to buy the tiny company than to start from scratch.
With the bread company, the advisor worked with owners to delay a sale for over a year while the production methodologies, distribution network and internal operations were fully documented and put in order to satisfy an acquirer.
With the transportation company, the M&A advisor insisted on preparing a full sales information package even through there was really only one logical buyer. It would have been tempting to just rely on an exchange of documents. But the information package helped show the opportunity clearly to the ultimate buyer.
With the snack enterprise, the investment group developed a detailed growth plan and then worked with the management team to rapidly ramp up production and sales. The company went from $7 million in sales to over $120 million within three years.
These results are extraordinary, and can’t be duplicated in every case. However, they illustrate the value of a good advisor and a good M&A process.
"The entire process went smoothly and professionally. The BTS team kept me fully informed at every step. They worked hard and were effective in bringing the deal home."
"Skip and I continue to be grateful for all you have done to make the sale of Pure Flow come to fruition."
"BTS’s level of expertise in the process and close attention to detail enabled us to successfully navigate the deal."
"These types of transactions are often long and complicated and I doubt it could have been successfully completed without your close ongoing involvement."
"The outside objective point of view that you have brought us has been invaluable as we prepare for the rapid growth."
"John then found the right buyer and coordinated a seamless transition—he doesn’t miss a single detail."
"John immediately identified our strengths and experiences and discussed a business that ultimately was more in line with our goals."
"The BTS team came in, evaluated everything in a professional and thankfully non-threatening manner."
Prepare for the Market Rebound
For many business owners, the economic effects of the COVID-19 pandemic have been devastating – especially for those who were planning to sell their businesses.
Using Downtime to Add Value
As business owners are working to process the impact of COVID-19, we’re looking at how it will affect M&A. The good news is that many companies and private equity firms have been doing well for year
Are Buyers Still in the Market?
We believe that mergers and acquisitions will continue once the current crisis ends...based on the volume of inquiries from private equity funds, search funds and well-funded individual buyers.
Use the Threat to Better Prepare
Today there is a lot of uncertainty about the future of business...there are things you can do to prepare for an eventual sale of your company– especially now.
Crisis Shows Ripple Effect of Business
Our focus at BTS is on small companies that are the backbone of the economy...This gives us exceptional insight into what it is like to be owner-operators.
Dealing with risks in a company sale
The passing last week of Harvard Business School professor Clayton Christensen – famous for his theory of business disruption - is a good time to consider business risk.
M&A Advisor Tip: Earnouts Can Break a Deadlock
Earnouts can be used to address a perception of risk faced by a buyer. They also are used to bridge a valuation gap between a buyer and a seller.
Changes by owners helped a sale
Owners considering selling can look at the experience of a N.H. company for ideas of what to do to increase their chances for a good transition.
Advisor Tip: Don’t lose your focus
Don't let those future plans distract you from what's going on today.
Growth Methods Used by Buyers
We often hear from founders who feel they have hit the ceiling with what they can do with their companies. Buyer groups in the market see this as an opportunity.
Precision Machining Company
Initially, liquidation was a serious consideration. It would offer a quick exit but would hurt loyal employees and disrupt the customers who had come to rely on its quality production.
Green Product Company
Our client owners could dig in for the long haul…However, this would take five years or more. Owners simply lacked the horsepower to do it.
Water Purification Company and Young Buyers
Owners decided they wanted to retire. They also wanted to be fair to the staff who had been loyal to them. Could the company be sold, the staff retained and the facility remain in use?
Magnetics Company with High Profile Customers
(T)he manufacturer would need to focus on growing EBITDA to capture interest from major strategic buyers and achieve a higher multiple of earnings.