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How To Sell In A Buyer’s Market

Posted on July 28, 2023 By

In recent years there has been a significant degree of volatility in the market, but it is generally agreed that we will likely enter a “buyer’s market” soon. Most hear “buyer’s market” about real estate or consumer goods,

where the number of homes on the market exceeds demand for housing, so naturally, prices drop. However, in M&A, this is a bit more complex.

Buyer’s markets can take several shapes and forms due to the uniqueness of every business. For example, there are buyer’s markets where multiples themselves do not fluctuate highly – instead, what’s seen is an increase in structure. Long-term notes, seller earn-outs, additional debt funding, co-investment, and increased representations and warranties are all ways buyers maintain both comforts with deals and similar valuations. In addition, clauses such as “lock-in” agreements or “break up” fees are often seen more commonly during the dealmaking stage, which provides buyers security during exclusivity periods on transactions. The structure of the offer can matter as much or more than the valuation, and most seasoned buyers will add more form to a deal long before they reduce the valuation.

The perfect exit or growth plan awaits

What about finding the buyer? 

Typically buyer’s markets come about due to economic downturns. Businesses cannot maintain the same level of performance; naturally, profitability drops, so sellers tend to be put in a position of relative weakness as they cannot match the high levels of customer spending and free cash flow from prior years. In many cases, this is when most buyers emerge sensing opportunity (the adage “buy low, sell high” comes to mind).

However, several of these buyers tend to be opportunistic and inexperienced and seek solely to capitalize on what they believe to be a good time to sweep up a business in a fire sale. The ability to filter and determine who are strong buyers capable of putting forth meaningful offers for businesses during a downturn is a subject for which you would likely wish to seek a specialist. Seasoned buyers will generally work within the market continually and will often work with proper structure and planning to outperform the new buy-side competition, providing opportunities for the right parties to come together.

We know how to sell companies better than anyone.
The prime question is what best helps demonstrate value in a buyer’s market. Which metrics are attractive? What could be changed in short order to best present value? Buyers look to see key metrics in businesses when determining “safety” and long-term profitability are varied and investor and industry-dependent, but there are some general guidelines. One of the most prominent includes recurring revenue. Buzzwords such as Software as a Service (SaaS, Platforms as a Service (PaaS), and Infrastructure as a Service (IaaS) have generated a general idea that “things as a service” are attractive investments currently, but why is this? The answer lies in subscription models offering long-term contracts that quickly display continual revenue and solid predictions for future income. These types of revenues are easy to explain to banks and private investors, provide security in future income, and so are highly sought after. Subscriptions are one of the most popular forms of recurring revenue, and these can also come from dealership agreements, long-term contracts, and other forms of payment over time.

During key, recurring revenue is one of many components commonly sought. Other examples include customer concentration, service agreements, safety metrics, management team strength, cash-to-debt positions, receivable return rates, and other factors. In each industry, different buyers weigh separate sets of metrics based on what is most important and needed in the space, and talking these through and presenting the most vital points of a company can go a long way in increasing valuation and providing flexibility.


  Christopher Davidson
  Transaction Support Associate
  Benchmark International

  T: +1 512 861 3317

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Benchmark International is a global M&A firm that provides business owners with creative, value-maximizing solutions for growing and exiting their businesses. Benchmark International has handled over $10 billion in transaction value across various industries from offices across the world. With decades of M&A experience, Benchmark International’s transaction teams have assisted business owners with achieving their objectives and ensuring the continued growth of their businesses. The firm has also been named the Investment Banking Firm of the Year by The M&A Advisor and the Global M&A Network as well as the #1 Sell-side Exclusive M&A Advisor in the World by Pitchbook’s Global League Tables.






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