| In This Issue: |
| Volume VII | By Mark Crossman, CA, CBI |
|
| The Corporate Buyer
It is cheaper to buy volume than it is to create it. The type of buyers is changing. Use a Specialist Did you know that there are people specifically trained in selling businesses? PLUS A representative selection of businesses currently being offered for sale through M&A Canada. What is Involved In Buying Business? 5 Steps in buying a business through M&A Canada. For More Information Please Contact: M&A Canada Box 36136 Halifax NS B3J 1H1 Tel: 902.422.2211 Fax: 902.422.1328 Email: macanada@istar.ca |
While selling businesses to entrepreneurs, and wannabe entrepreneurs,
continues to form the bulk of our assignments, we are seeing a change. Over
the past three years or so, more and more acquisitions are taking place by other corporations. The companies doing the buying are either competitors, companies that carry complementary products, or businesses that are similar in many ways other than geography. These corporate acquirers are buying for a number of reasons. Market penetration and revenue growth are important issues for many companies. This is especially true for public companies. Most corporate acquirers fully understand that buying volume is cheaper than developing it. They understand the costs of trying to win market share and they understand fully the costs of operating below break even. Opening the door in a new marketplace with a profitable level of volume is very enticing. Equally important for most corporate acquirers is the ability to buy management talent. Growing companies need good people and many successful smaller companies have achieved their success by hiring good people. A corporate acquisition by a growing company in an industry is often an opportunity for advancement for good employees in the acquired company. |
Many acquirers also like the former owner to stay involved for a period
of time. This helps them with the transfer of contacts and enables the
previous owner to ensure that his customers are treated right after the
transfer. The buyer wants the change in control to be as smooth as possible.
Technology is also making corporate acquisitions more attractive. It is an increasingly important part of business operations; more and more resources must be devoted to maintaining state-of-the-art systems. Large companies want to spread this investment over as big a pool of operations as possible. Small companies may lack the financial resources to remain competitive. Technology also helps larger firms manage geographically diverse operations. It is truly shrinking the world. As these globalization and economies of scale issues continue, the private business owner has to make sure that their 'Exit Plan' is complete enough to catch all of these possible buyers. Remember, at some stage, most business owners will sell their businesses. The keys are to work to build value, to stay on top of trends, and to attain the highest and best price for the years devoted to building the business. The days of automatically selling to the staff is gone.While it is always a possibility, your 'Exit Plan' has to look far beyond this single option. It should be professionally managed. Can you afford to not get the best deal out there? |