Buyer’s SearchBusiness General Business
Posted by Jennifer Smith on
A trend that we’re seeing in 2022 is an increased demand for strategic acquisition, initiated from the buy side. There have always been more buyers than sellers in the market, but buyers are now approaching their goals in a more targeted and intentional way. This brings us to an incredibly precise and effective tool: the Buyer’s Search.
There are two groups that that engage us for Buyer’s Searches: Individuals and Companies. Let’s look at how this process works for each group:
An individual has typically exhausted many other avenues. They desperately want to leave their job, usually in corporate America, and they just aren’t finding any companies they want to buy when they search all the business-for-sale websites out there. When they strike out online, they usually come to us to see if we have any pocket listings (i.e. companies that we don’t intend to market online or haven’t fully packaged yet). If we don’t find a good match there, the next logical step is to conduct a Buyer’s Search.
A company typically has a very clear set of criteria for growth through acquisition: business model, revenue or EBITDA range, number of employees, geography, etc. They know exactly what they want to acquire, but they are either having a hard time finding it or they feel that a business broker who can focus 100% on finding targets and doing deals for them based on a success fee makes more sense than building up overhead with an internal team.
Regardless of the buyer profile, the sell side is typically reluctant to engage and share information with an unknown individual or a competitor. Often, they won’t even admit that they are open to selling for fear of having that information used against them. Conversely, when we approach them as the largest business brokerage firm in North America with strict adherence to a professional code of ethics, we can often get in the door and engage the seller in more fruitful conversation.
In a Buyer’s Search, we:
- Ensure a full and complete understanding of what the buyer wants in an acquisition target.
- Develop a targeted list and begin to mail/email/call on that list to reach the decision maker.
- Have an initial conversation with the prospective seller to determine that they do, in fact, meet the criteria.
- Execute a mutual non-disclosure agreement to protect all parties.
- Share the buyer’s information with the seller and verify that it is a good fit for them. The buyer who initiated the Buyer’s Search has the right of first refusal on any seller sourced through the engagement.
From there, we facilitate it like any other deal: meetings, offer, diligence, financing, legal, escrow, and closing.
When we are retained for a Buyer’s Search, we provide an engagement letter that clearly outlines what we expect our hard costs to be for marketing to sellers and our fee matrix if we are successful. Which side pays our success fee is typically addressed in the Letter of Intent; often it’s shared between the buyer and the seller as both sides benefit from us getting the deal to the closing table.
Hopefully that provides a little more insight into ways that buyers find and purchase a business that will help them achieve their goals. If buying a business is in your plans for 2022, reach out for a confidential conversation.