Key questions an acquirer will ask themselves include:
- What are the biggest risks I run here?
- How can I integrate the business into mine?
- How experienced in mergers and acquisitions are the vendors?
- The return on our energy, money and focus has to be really worth it.
- Buyers will use several different methods of evaluating a business, and will be looking to obtain a good return on investment; hopefully within a 3-5 year timeframe.
You add to the value of your company if you are able to demonstrate
- Rarity Value
- Niche Market
- Good IP
- Positively cash generative
- Reliable recurring revenue
- Multiple revenue streams
You reduce the value of your company if the buyer perceives risks like
- Litigation
- Vulnerable to new legislation
- Shareholder disputes
- Vulnerable supply chain
- Dependence on a few customers, people, offerings
In simple terms you maximise value by identifying and dealing with the right buyer, reducing their perceived risk, highlighting the potential and controlling the deal process.