Who will buy your business?
When people ask – “who will buy my business” the broad answer is that there are three groups of people who will be interested in buying your business. Understanding the different types and what motivates them will enable you to decide whether that type of buyer is right for you – as we write about in our great article here
The most likely group of financial buyers will be private equity companies. Whilst there are many large companies in this area, they come in all shapes and sizes and most specialize in the smaller business rather than mega-corporations.
Private equity companies typically take an active interest in the business and will often want one or two seats on your board. Whilst some will want to be involved for the long term, most private equity companies will look to sell on their stake to another company within 3-5 years. They’ll want to see strong growth in any business they invest in and will often set ambitious targets.
Family offices and private investors may act like private equity firms in the purchase, but often are looking for a longer-term involvement and may not have the same desire for the day to day involvement in the business operations and strategy setting.
For more information on the world of private equity, the British Venture Capital Association has a great guide on their website
Trade buyers are usually companies in the same industry who’re looking to purchase a company to integrate into their existing operations. These are the most common type of acquirers and are often the people who financial buyers will seek to offload their investments to.
Trade buyers are often interested in more than just financials. Since they seek to integrate the company into their own operations, they are often more interested in a company’s strategic advantages compared with their own. This can mean their customer base, supplier relations, IP or superior technology advantages. Reducing the competition in a market by buying the rival can be a very successful way to grow a business
Your Management Team (MBO)
An MBO is when a company’s existing management team buy out the owners of the business. They’re often used in larger companies when the company wishes to divest part of the company which it no longer sees as part of the core business. In this instance, the managers of the division will purchase the assets from the company, usually with the help of a private equity firm or lender, and form their own company with the assets. In a smaller company, it can be a great way of ensuring that the business that you’ve built up is handed over to a group who understand the business deeply and share, some if not all, of the emotional attachment to the operations and customers that you do.
Now that you know the key players, we’d suggest you go to our Learning Centre which has loads more detail on the process of preparing your business for sale.