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Who Are Financial Buyers and What Opportunities Do They Present?

Financial buyers are the companies we work with that are typically labeled as private equity (PE), a family office, a hedge fund, etc. In the traditional sense, a financial buyer is primarily concerned with the cash flow generated by a company or asset that they acquire. They think about investment opportunities (clients to us) through the rate of return they can obtain from years of bottom-line enhancement and an eventual resale of the asset at a premium, or much higher valuation, than when they bought it. Like trading stocks, but with more hands-on involvement, they wish to “buy low and sell high.”

There’s a strong chance, however, that many of the buyers you’re likely to see now as a seller in the lower-middle market fit the mold of what I call the “new-look” financial buyer. Your traditional private equity funds, for example, now tout an investment strategy with no timeline for an exit on their portfolio companies. This approach emphasizes the “culture” their respective firms bring to the table for the seller, and in a highly competitive buyer market vying for deal flow, this might make all the difference.

The new-look financial buyer focuses on employee retention, low-cost growth initiatives, management equity rollover, and various other incentives to promote an environment free from the traditional return-over-everything stigma. Go to the “About” or “Approach” section of many of these firms, and I am willing to bet you’ll see words like “collaborate,” “legacy,” “partner”—perhaps even with a chart comparing their firm side-by-side with the traditional PE model to demonstrate explicitly how they’re different. This is especially prevalent in the lower-middle market where our clients are often owner-operated, founder-led businesses cultivated across generations and spanning multiple decades.

 

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A financial buyer must now separate itself from the competition, which is good news for our clients. As mentioned above, time horizons for financial buyers have increased in length as many PE firms now reorient as long-term investors. Many will make it a point to let our clients know they don’t intend to dramatically cut costs (including through personnel changes) as this would directly conflict with the evolving model.

At the same time, financial buyers (i.e., private equity groups and other institutional investors) can be lucrative partners for our clients through a variety of value-adding benefits that they bring to the partnership. These buyers, for example, often bring economies of scale through established and profitable portfolio (“platform”) companies and are therefore able to jumpstart revenue via access to untapped markets or unrealized customers bases. Furthermore, these platforms absorb back-office duties that might have previously slowed down the productivity of key employees, and even owners. Also, while exit strategies have become more relaxed from a timing perspective, financial buyers will not hold the asset indefinitely, and for sellers who maintain equity in the merged company post-acquisition, this means the opportunity to take a “second bite of the apple” upon exit.

When dealing with a financial buyer, be sure to ask some important questions:

  • Are you a committed capital fund? It’s important that they have financing available instead of “shopping” the deal after locking a client into a letter of intent.
  • Have you closed a deal before? Have you closed a deal in this space before? Note: a website with no portfolio page of active or inactive past deals can be a red flag.
  • What does your capital stack typically look like (i.e., how much leverage will they use or how much debt will be placed on the balance sheet on the company)?
  • How long has your fund been around?
  • Do you have operating partners in the space?
  • Why are you interested in our client?
  • How do you plan to integrate our client into your firm or existing platform company?
  • Culture is important to our clients. Can you speak to culture?
  • How do you typically structure your deals?
  • What is your timeline for a completed transaction?
  • Am I able to speak with owners of previous companies for deals you’ve completed?
  • My employees mean everything to me. What do you plan to do with them?

This is by no means an exhaustive list. Seller questions to the buyer will, of course, become more specific as the deal progresses. However, the basic questions above are a good starting point and represent the beginning of a potentially meaningful and lucrative journey for sellers considering PE for the next phase of their company’s growth.

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Do You Want to be Featured at the Pre-eminent M&A Event of the Year?

Benchmark International is pleased to announce our exclusive attendance at the national ACG Intergrowth 2019 conference on May 6th-8th in Orlando, Florida. This is a valuable opportunity where we meet with thousands of well-funded private equity deal-makers and draw their attention to the opportunities we are currently representing.

We have had major success at this event in the past with offers on over 75% of the businesses we featured. This creates competitive tension between financial buyers and strategic buyers.

ACG’s annual event is specifically designed for those on the hunt for private capital in the middle market. With over 2,000 registered attendees and $189 billion of investable capital, this is not your typical meet-and-greet. We currently have 60 one-on-one meetings scheduled with business development team members (the people who analyze Teasers and CIMs) of these PE funds.

Would you like to be showcased to leading dealmakers with strong, acquisitive appetites? Naturally, we present only a select number of companies for each event, so we would encourage you to contact us now to ensure your business is included.

*All opportunities must be submitted by April 30th, 2019.

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How to Avoid Leaving Money on the Table When Selling a Business

The sale of a privately-owned business is often the most significant financial event in the life of the owner. It marks the culmination of years of hard work and converts paper wealth into real wealth. It is a one-time opportunity with no do-overs. Every business owner surely desires the best economic outcome, yet, time and time again, business owners leave money on the table by not adequately preparing for the sale of their company. This article suggests five actions that private business owners can take to avoid leaving money on the table when selling their business. 

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Is It Time To Sell My Business ?

Determining whether it is a good time to sell your business is one of the most challenging decisions a business owner has to make. There are innumerable factors that affect this decision and it’s important to not get overwhelmed. A few things to take into account are financial situation, the company’s future/outlook, the opportunity cost of time, and the type of deal structure being pursued.

Financial Situation

Usually, the first factor that business owners consider when making the decision to sell is the financial impact this will have on their lives. It’s important to analyze one’s current lifestyle and how a potential sale would change that – what the payoff would be. Unless a business owner is in a troubled situation, they’ll want to make sure that the decision to sell will not hinder their long-term lifestyle. A hasty decision here can have a catastrophic economic ripple effect. But, selling at a time that maximizes economic profit can potentially result in lifelong financial freedom.

 

Company’s Outlook

If an owner is at a point to even consider selling a business, there’s a high probability that they’ve put in a significant amount of time, effort, and capital into it. Pondering this decision generally stems from a plateau in company growth or changes in the industry landscape. When this stage is reached, one must determine if they are in a position to take the company to the next level or if it is better to move on after building it to this point. It’s important to understand that being aware of “when to get out” is not a slight on the owner. Rather, it is the recognition of an opportunity to pursue other goals. The business has been a large part of life, the employees are important, and the hopes of a successful future is why companies are built. So, the key is to make sure that the “hands” the company is going to be in moving forward satisfy the needs of all the key people that are going to be impacted by a
potential transaction.

 

Time

Letting go of something that has been such a large part of one’s life can be very daunting. The fear that this is “the end of the line” for a business owner is often what doesn’t allow an individual to make a decision with sound judgement. The opportunity cost of time needs to be taken into consideration – that is, what you can allocate time to in life that you were unable to do before. Perhaps an exit can allow more time with family or another business venture; all such options open up more once the full scope of a business sale is analyzed beyond the initial fear.

 

Deal Structure

The type of deal for a business sale is arguably the most important factor when making the decision to sell. The beauty about this is that deals can be structured in almost any way imaginable. Many owners think that selling a business is an “all or nothing” type of transaction. But the reality is that majority of business acquisitions are centered around partial sales and/or long-term seller incentives. It is perfectly reasonable for a founder/owner to retain ownership to “keep some skin in the game” or to have a management agreement that allows them to continue being involved in the company. Owners need to educate themselves on the kind of deal structures most suited for them and understand that the scope of deal types is far more customizable than people realize. 

 

As has been pretty clear, there is no cookie-cutter process behind making the decision to sell a business. Individuals need to take countless variables into consideration when doing something of this magnitude. A great way to begin this process is to narrow down what aspects of the decision are most important to the owner and then analyzing each variable individually. Most importantly, don’t forget that if a deal is thinkable, it is achievable.

 

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View Our Exclusive US Opportunities

Benchmark International has been engaged as the exclusive sell-side broker for international companies across all industries. However, in this PDF, we are showcasing our Featured US Opportunities.

If you find the teasers you would like to see, please contact Garrett Spek at Spek@BenchmarkCorporate.com or call 813-898-2373 and provide the six digit 
alphanumeric code.

All of these clients have retained Benchmark International as their exclusive broker and we are not co-brokering any of them so if you have seen them elsewhere, we are the source. That said, we appreciate your passing this list on to any and all serious buyers you may know of.

Featured US Opportunities PDF

Benchmark sells over 100 businesses every year, many involving cross-border deals. If you have specific acquisition interests, please email your criteria to acquirerupdate@benchmarkcorporate.com.  You can also let us know if you would like to sign up to receive future opportunity marketing emails.

Beyond this list, we also have EmbraceBenchmark.com, which showcases a complete listing of our US opportunities.

Looking to Aquire an Exclusive Opportunity in the Americas?
Contact Kendall Stafford at Stafford@BenchmarkCorporate.com

Looking to Acquire an Exclusive Opportunity in Europe?
Contact Bhavina Halai at Halai@BenchmarkCorporate.com

Looking to Acquire an Exclusive Opportunity in Africa?
Contact Andre Bresler at Bresler@BenchmarkCorporate.com 

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View Our Featured International Business Opportunities

Benchmark International has been engaged as the exclusive sell-side broker for international companies across all industries. Please take a moment to review the Featured International Opportunities PDF.

If you find the teasers you would like to see, please contact Anthony Sourour at Sourour@BenchmarkCorporate.com or +1 813 898 2391 and provide the six digit
alphanumeric code.

All of these clients have retained Benchmark International as their exclusive broker and we are not co-brokering any of them so if you have seen them elsewhere, we are the source. That said, we appreciate your passing this list on to any and all serious buyers you may know of.

Featured International Opportunities PDF

Benchmark sells over 100 businesses every year, many involving cross-border deals. If you have specific acquisition interests, please email your criteria to acquirerupdate@benchmarkcorporate.com.  You can also let us know if you would like to sign up to receive future opportunity marketing emails.

Beyond this list, we also have EmbraceBenchmark.com, which showcases a complete listing of our US opportunities.

Looking to Aquire an Exclusive Opportunity in the Americas?
Contact Kendall Stafford at Stafford@BenchmarkCorporate.com

Looking to Acquire an Exclusive Opportunity in Europe?
Contact Bhavina Halai at Halai@BenchmarkCorporate.com

Looking to Acquire an Exclusive Opportunity in Africa?
Contact Andre Bresler at Bresler@BenchmarkCorporate.com 

READ MORE >>
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