Beyond Valuation: What does an Attractive Offer Look Like?
There is no question that Valuation plays a huge role in considering the right transaction for you. After all, a transfer of assets is occurring, so price certainly matters. That said, the most promising offers incorporate a comprehensive view beyond just price and include elements that are less tangible such as the following three points:
1. The buyer knows the value they bring to the table
As Roger L. Martin pointed out in Harvard Business Review, unfortunately, 70–90 percent of acquisitions fail. HBR’s research suggests that this is because organizations that “focus on what they are going to get from an acquisition are less likely to succeed than those that focus on what they have to give it.” The most promising offers are those where the potential buyer is not just acquiring assets, they are very strategic in how they are going to add value to the seller’s business. Experienced buyers think through what they bring to the table before they get to the table.
2. The seller’s experience and intellectual property are valued highly
Successful businesses take time to build. Through that process, the organization builds an immense amount of intellectual capital that, while difficult to quantify, absolutely adds to the value of the business. Smart buyers know this and value the seller’s experience and knowledge. They look for ways to capitalize on this and to keep it in-house for as long as possible (often in the form of valuable leadership roles).
3. The buyer and seller share a vision for the future
When a buyer walks into a room and says, “I want to buy all of your assets” that discussion is about price only. But when a buyer walks into a room and says “I want to buy your business to do ABC and work towards the goal of XYZ” the discussion is very different. Every business owner/seller is working towards something. The magic happens when the buyer also has a goal or vision for the future and that factors into their offer in a compelling way.
Sellers need to be heard by their buyer and they hope to feel optimistic about the future of their business as it lives on without them. When there are multiple offers on the table, the ones that include these three elements quickly stand out from the rest.
Symmetrical assists Middle Market companies strategically assess their needs and prepare for big transitions. If you are considering buying or selling a business, contact us for a confidential discussion about how we can help.