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Should I Use a Strategic Buyer to Sell by Business?

Posted by Matt Perkins in
The vast majority of business sales today, whether online or offline, focus on the sale of a business to another operator or owner who continues to operate that company as a standalone business. The price of the company listed for sale in this situation is based on the buyer being what is known as a financial buyer. This is because the value of the company is primarily based on a financial value. The asset value, market value or income value are the various data points taken into account. However, there are other types of sales that might influence businesses sold in the offline and online market. This happens when one business purchases another business. The buyer of the company might have some individual and differentiated strengths that make the business that is being purchased more valuable. In some cases, a buyer might earn more just by taking out duplicate expenses. In these business sales this is known as strategic value, and therefore the buyer is a strategic buyer. Pricing as Strategic Buyers Getting the best offers from strategic buyers should be the primary goal when consulting with an experienced and knowledgeable business broker. In these cases, the business is typically marketed without a solid price put on the business. Putting a firm price on the business also means there’s a limit and cap to the potential offers. With a strategic buyer rather than with an individual buyer, businesses are able to put a value on the company in order to present a firm offer. One aspect of a strategic sale is relying on a compelling report about the business. This information is very important to the company and its overall value proposition but is only given to prospective buyers after they have been fully qualified by a knowledgeable business broker and have signed a confidentiality agreement to protect the information they’ll review in the report. This gives the strategic buyer the opportunity to evaluate for themselves the potential value of the company. After this phase when the report has been presented to potential strategic buyers, your business broker might reach out to their own personal network of strategic buyers that they suspect might be interested in your company. The next phase of the company going for sale is a competitive offering process. This is slightly different from selling to an individual buyer since the competitive process is designed to get the best offers from the buyers who have already been pre-qualified and are appropriate for taking over the company. Although the next phase of the process sounds relatively simple in reaching a deal, the closing process can be fraught with opportunities and potential pitfalls. Having a knowledgeable business broker guide you through this process and help you understand the various implications for what it means for the underlying value of your company, can make this somewhat difficult process that much easier. Consulting with a dedicated business broker is strongly recommended at the outset of your decision to sell your company.