Knowing Your Buyer

As well as understanding the fundamentals and financial aspects of any offer for your business, understanding ‘your buyer’ is critical to the success of the deal and your ongoing relationships post-completion. Whilst it’s not possible to know your buyer ‘warts and all’ at the start of the process, your team at Benchmark International will work with you throughout the process to build your buyer knowledge.

Step by step, we will work with you to ask the right questions at the right time, providing you with the information you need to make the all-important decision of who is the right buyer for your company, for your employees, and for you.

Database Information – Publicly Available Information

A 'Buyer List' will ordinarily be prepared following initial discussions with you and the completion of a 'Research Brief'. From this, we will search both our own knowledge base and various subscribed-to databases based on agreed parameters, such as turnover/ profitability and previous deal completions. This will provide an initial level of reassurance that any potential buyers added to the Buyer List should meet the financial requirements to complete an acquisition of your business. That’s not to say we will not make further enquiries as matters progress.

Sometimes, however, a potential buyer might approach us as a result of our wider marketing activities. Where this party is a major corporate, and perhaps a significant size, we will be able to access the required information from our various databases, as above. Where, however, the party is perhaps smaller and not one we have dealt with previously, we will request a 'Buyer Profile' which should provide at least some information relating to their acquisition strategy, acquisition experience and financial position. We will always share this with you before engaging the interested party further.

Direct Information – Requesting Accounts and Forecasts

As the deal process progresses, particularly when an offer is anticipated or received, there will be opportunity to gain further information directly from the buyer such as up to date financials and details of their ability to fund a deal. Typically, we will expect to receive the last three years accounts (P&L and balance sheets) but at this stage we will also engage the buyer on how they will fund all aspects of the deal they are proposing, including completion payments and any further payments such as deferred or contingent consideration.

We may ask to see the buyer’s detailed profit and cash flow projections they have submitted to their funders. In the absence of these we may perform some form of serviceability assessment, based on a number of key assumptions, enabling us to have a sensible discussion with you around any key issues arising.

In many cases, we are likely to conclude that the interested party has resources to complete a deal to buy your business, although in some cases you may have the difficult decision of whether or not to progress discussions.

Deeper Dive – Buyer Presentations

Although any chosen buyer will perform their own financial, and perhaps commercial, due diligence into your business before completing a deal (under a formal non-disclosure agreement), it’s not the norm for a seller to perform the same level of due diligence on the buyer.

To overcome this challenge we can request that the buyer presents the above information, along with their vision for the business, as a formal presentation, giving you the opportunity to ask questions across a wide range of subjects. This can often provide the level of overview required in a relatively short time. Where required, we will support you through this process, so please feel free to raise with your deal team.

A key advantage of this approach is that it gives you, with our support, the opportunity to assess the credibility of a buyer in a formal setting, to ask the pertinent questions and ensure you are happy to proceed.

Not Forgetting – The Fit Needs to be Right

In addition to the financial and deal-specific matters we will assess with you, it’s essential there is a degree of chemistry between the parties. There is no template for this, but there are questions you can ask and assess at all stages of the process, such as:

Why is the buyer interested in your business, how does it fit into their group and what plans do they have for it?
Does the buyer have the resources to fulfil their plans for the business?
Do your own future working plans and roles align with those intended by the buyer?
Are you comfortable with the buyer’s management style?
Have you met all the buyer’s key decision makers, and indeed an operational management with whom you will work closely with post-deal? Either formally, or for dinner, perhaps?
Have you visited, or toured, the buyer’s premises?
Have you been able to speak with, or take references from, any previous business owners that have sold to this buyer?
As well as the buyer's website, is there anything of interest on the internet, such as Trustpilot or Glassdoor reviews etc.?

Summary

Every deal, and every buyer, is different, and although it may not always be possible to obtain the requisite levels of financial information and assurances at the start of the process, your team at Benchmark International will work with you to improve your knowledge of the buyer such that you can make the right decision for you and your business.

Author
Dean Watts
Associate (Buyer Liaison)
Benchmark International
T: +44 (0) 161 359 4400
E: Watts@benchmarkintl.com

Dean is a highly experienced associate who works full-time with both clients and buyers alike.

Europe: Michael Lawrie at +44 (0) 161 359 4400 / Lawrie@BenchmarkIntl.com

Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkIntl.com

Africa: Anthony McCardle at +27 21 300 2055 / McCardle@BenchmarkIntl.com

ABOUT BENCHMARK INTERNATIONAL

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 $8.25 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 #1 Sell-side, Privately Owned M&A Advisor in the World by Pitchbook’s Global League Tables.

Website: http://www.benchmarkintl.com
Blog: http://blog.benchmarkcorporate.com