What are Buyers looking for in a Business?

Company owners choose to sell for various reasons. For example, when approaching retirement age, some wish to spend more time with their families and relax after years of stress and twelve-hour days. The company is a fixed asset that, when sold, will, hopefully, provide the money to fund their desired new lifestyle. Whatever the reason for selling, finding the right taker requires market knowledge. In particular, understanding what buyers are looking for in a business will significantly improve the chances of negotiating a satisfactory sale. 

While some may lack the patience to build a company from scratch, they will often be keen to invest in a going concern. If they see profits, a sufficiently large client base, competent staff and adequate infrastructure, they will generally be happy to do a deal, assuming they can raise the necessary capital. However, sellers should be aware that purchases by individuals tend to be more prone to complications. By contrast, existing company owners are more strategic buyers who know precisely what they are looking for in a business. 

There are several reasons why one company may be keen to acquire another. A prospective purchaser may be looking for an opportunity to expand. For example, it could benefit a manufacturer of solar panels would benefit from acquiring the company that produces the batteries that are needed to complete the renewable energy process.. The deal leverages the synergy between the two operations, offering the acquirer a means to extend its product range without the need for a lengthy learning curve.  

Supply chain disruptions are a severe threat to any company and have become more frequent in the wake of the pandemic. Consequently, today, what many buyers are looking for in a business is a source of security. Purchasing or joining forces with a mission-critical supplier will often be the best way for a company to safeguard its production. For example, a car manufacturer could gain peace of mind by acquiring a tyre company.  

Other common strategic reasons for buying or investing in an established business include a desire to penetrate new markets. Sometimes, a company whose products or services are predominately seasonal may wish to gain year-round security by extending its offering. While their motives vary, what most buyers are looking for in a business is surprisingly consistent.  

The prospective owner might be deterred by a company that is too dependent upon its owner’s skills or connections. Sellers need to ensure their staff can operate independently. Alternatively, they should be willing to stay on after the sale to smooth the transition. Naturally, evidence of sound financial management and due diligence will play a critical role in the buying decision. Also, strong management and sales teams and an effective information system are invariably high on the list of what buyers are looking for in a business. 

Readying a company for a sale can be an exacting and lengthy process. Marketing it, finding the right purchaser and negotiating favourable terms will be even more challenging. In practice, these are all tasks for a specialist in mergers and acquisitions. As a seller, you want to know that your interests will remain paramount. As an established sell-side M&A advisory service, Deal Leaders International knows what buyers are looking for in a business but will never fail to prioritise the seller’s needs. 

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