Have you had a larger competitor, private equity firm or other investor make an approach to acquire your business? Have you considered why not?
Investors are sitting on large volumes of capital that they need to put to work and opportunities for a decent return are thin on the ground. The stock market has been predicted a major correction in 2016 so doesn’t make for a great place to park funds, commodity prices are all over the place (but mostly bouncing about on the floor with no prospect of returning to previous levels), other asset prices – including property – are suspected to be in bubble territory.
So the money flow is into businesses.
M&A activity in 2015 was at an all time high, and that’s across sectors, at all price points. There’s stability in size and businesses have been growing by acquiring their competitors, merging with them or buying smaller entities.
This creates opportunities for small businesses. Unfortunately, most small businesses don’t take the (relatively) simple steps necessary to make themselves attractive to acquirers and don’t know how to get on investors’ radars.
Making Yourself An Investment Target
Some of the key things to do to make yourself attractive in this market are:
1. Make yourself redundant ie., stop working in the business and start working on it. Investors want businesses that are not reliant on one or two key individuals.
2. Look professional. Tidy up your public image, write a business plan and keep proper records. Plan for the exit and plan for an orderly handing over process. Work to the plan.
3. Stop trying to declare lower earnings. While that may have short term tax advantages it will have a severe impact on the price you get and this will more than wipe out the savings on tax. Lower earnings also make you less interesting to buyers.
4. Create a niche for yourself and excel in it. Build at least one aspect of your business to stand out – whether technical expertise in a very specific area, a team that delivers an outstanding performance, intellectual property, even a superlative social media presence. Organisations that see a hole in their own operations that your business can fill might be prepared to pay over the odds to acquire you.
5. Monitor and manage your public profile, there are several good reasons to do so anyway. Whether it’s your company’s credit score, press mentions or your online profile (particularly in relation to social media), be aware of what prospective buyers are going to see when they do early stage research on you / your business.
How To Get On Investors’ Radars
While maintaining a strong public images, issuing press releases, featuring high in search engine results, taking active part in industry events etc., can get you seen and noticed by investors, the best way is probably to have a competent professional represent your business. Choose a reliable business broker to get the news out, with or without disclosing your company name, that you may be open to offers.
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