You and your consultant should be developing a targeted list of possible purchasers. During this process the advisor’s knowledge of the mergers and acquisitions marketplace will be extremely valuable. Your advisor should have a feel for which buyers are actively pursuing investment opportunities and a good sense of the attractiveness of your particular industry segment to such investors. Potential buyers usually fall into one of the following categories:
The ‘A’ List
Usually, an ‘A’ list of potential buyers is identified in the first instance. These potential buyers will probably be contacted on a no names basis using your business broker as an intermediary. The group may average 5 to 10 potential acquirers, but could have as few as 3 or as many as 20.
‘B’ or ‘C’ buyer classifications serve as a backup only after the ‘A’ list is exhausted. Another option is to break your buying list into two groups: competitors and non-competitors. Competitors could receive a more generic memorandum than non-competitors, in order to manage the risk of information leaks. While this approach may be beneficial, it could also cause confusion because it creates two parallel processes that may be difficult to control.
- Individual buyer
- Strategic buyer
- Synergistic buyer
- Industry buyer
- Financial buyer
The ‘A’ List
Usually, an ‘A’ list of potential buyers is identified in the first instance. These potential buyers will probably be contacted on a no names basis using your business broker as an intermediary. The group may average 5 to 10 potential acquirers, but could have as few as 3 or as many as 20.
‘B’ or ‘C’ buyer classifications serve as a backup only after the ‘A’ list is exhausted. Another option is to break your buying list into two groups: competitors and non-competitors. Competitors could receive a more generic memorandum than non-competitors, in order to manage the risk of information leaks. While this approach may be beneficial, it could also cause confusion because it creates two parallel processes that may be difficult to control.
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