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One Trick to Find the Best Strategic Acquirer

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Identifying and creating relationships with potential buyers can be a big initial roadblock for CEOs thinking about selling and/or exiting their companies. You may have spent years or even decades heads down on your business. Now it’s time to take your head out of the sand and engage an advisor, hit the networking circuit, or both.

Business News Daily recently ran a great post on the ins and outs of getting acquired by a bigger company; they identify benefits like accelerating growth opportunities, reaching economies of scale, and increasing awareness of your company and its products. Axial founder and CEO Peter Lehrman points out in the piece that strategic corporate buyers in many cases may pay a premium for businesses as compared to financial buyers like private equity firms.

If you’re thinking seriously about acquisition, the first step is engaging an investment banker or M&A advisor. We’ve written before about the value-add of advisors, who can create competition, provide transparency into an inherently opaque process, identify the best process and timeline for exiting, and more. Engaging an advisor can be useful years before a transaction in order to build up trust and consult on important issues surrounding a sale.

Recently, while talking with Eric Meerschaert, managing director of Chicago M&A Advisors, we learned another trick he advises for business owners in those nebulous early stages of M&A, when sale is just a distant-but-enticing possibility.

His tip? Use your company’s board to your advantage. “If you’re looking for strategic buyers, find board members who will get you entrée to those buyers.”

(If your business doesn’t have a board of directors, create one. A successful board can help your business unlock value in the short and long-term.)

Says Meerschaert, “relationships matter. We often walk into businesses without a board, where we have to sell the business totally cold.”

Usually, that means sellers are more likely to get what he calls a “financial value” rather than a “strategic value.” Meerschaert outlines the difference in our ebook on maximizing company valuation, but at the core, strategic valuation is concerned with unlocking the future potential of a company, rather than just with past financial performance, and depends on your company’s influence value (e.g., industry influencers’ perception of your business, your role in driving dialogue in your industry or niche, and the value of your product relative to competitors).

As you seek out potential board members, Meerschaert believes that smart owners and executives identify their best strategic buyers and line up board members who are connected to those potential strategic buyers. Who is your pie-in-the-sky acquirer? Who do you think is a realistic target? Once you have a list, identify potential board members who could connect you with those companies. This might be an executive at the company, or an executive at one of their biggest suppliers, or someone with industry clout and strong relationships with those individuals.

Associating yourself closely with leaders in your space will increase others’ perception of your company and help your name come up in more and more relevant conversations — piquing the interest of strategic acquirers before they even know you’re on the market. Plus, serious board members will challenge you to perform in a way that lines up with these strategics, not just with your current cash flow plan.

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