Is my direct competitor the most likely buyer for my business?

Jim Whitaker

A direct competitor may appear to be an obvious place to start when looking to identify a buyer for your business. But will they offer the best value and cultural fit? Credible competitors shouldn’t be discounted, however, if they have the financial resources and a good track record of previous acquisitions. In addition, having a credible competitor involved in a sale process will likely allow leverage against other strategic bidders.

Ask yourself: why would your competitor want to buy you? Would it be a purely defensive measure? It would, after all, allow them to grow their market share and at the same time stop you from eating into their customer base. Buyers rarely pay strategic values based on this reasoning alone.

A wider buyer search – both in terms of activity and geography – can capture companies and investors with potentially a better strategic fit.

Understanding buyer motivation

One of the principal elements of the business sale process is to understand potential bidders’ motivation for their interest in your company. Is it because they are an overseas acquirer looking to gain a foothold in a new territory? Do they have complementary products or services that they could cross-sell to your clients and vice versa, improving their value proposition and creating stronger commercial relationships? Perhaps their attraction stems from the talent in your team or your technical solutions. Your products or services may fill a significant gap in their current offering, which would otherwise take time and resource to create themselves.

These examples of a strategic buyer are more likely to lead to them placing a higher valuation on your business, maximising the sum you can achieve upon exit.

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