Blog: Buyer search (03/03/22) | Southeastern Missouri Log, Cape Girardeau, MO
A trend we see in 2022 is 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 focused and intentional way. This brings us to an incredibly accurate and efficient tool: Buyer Research.
There are two groups that engage us for buyer searches: individuals and businesses. Let’s see how this process works for each group:
An individual has usually exhausted many other avenues. They desperately want to quit their job, usually in corporate America, and they just can’t find any business they want to buy when they search all the websites for businesses for sale. When they go online, they usually come to us to see if we have any pocket listings (i.e. businesses that we don’t intend to market online or that we don’t have not yet fully packed). If we don’t find a match there, the next logical step is to perform a buyer search.
A company usually has a very clear set of criteria for growth by acquisition: business model, revenue or EBITDA range, number of employees, geography, etc. She knows exactly what she wants to acquire, but she is either having trouble finding it or they feel that a business broker who can focus 100% on finding goals and closing deals for them on a success fee basis makes more sense than racking up overhead with an in-house team.
Regardless of the profile of the buyer, the seller is generally reluctant to engage and share information with an unknown individual or a competitor. Often they won’t even admit they are open to selling for fear that this information will be 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 walk in the door and engage the seller in a more fruitful conversation.
When searching for a buyer, we:
- Ensure a full understanding of what the buyer wants in an acquisition target.
- Build a targeted list and start mailing/emailing/calling that list to reach the decision maker.
- Have an initial conversation with the potential seller to determine if they do indeed 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 suitable for him. The Buyer who initiated the Buyer Search has the right of first refusal over any Seller found under the Engagement.
From there, we facilitate it like any other transaction: meetings, offer, due diligence, financing, legal, escrow, and closing.
When we are selected for a buyer search, we provide a letter of commitment that clearly outlines what we expect from our fixed costs for marketing to sellers and our fee matrix if we are successful. The party that pays our success fee is usually addressed in the letter of intent; often it is split between buyer and seller, as both parties benefit from us bringing the deal to the closing table.
Hopefully this provides a little more insight into the ways buyers find and purchase a business that will help them achieve their goals. If buying a business is part of your plans for 2022, contact us for a confidential conversation.