Companies looking to grow through acquisition will obviously need to find the right company to purchase. The best candidates are companies who “look like you.” If you have service technicians, sell HVAC equipment, most of your customers on automatic delivery, margins are strong and you deliver in a 25 mile radius of your office, then the best acquisition candidates will have similar characteristics and deliver in the same area.
Many times however, you may be faced with opportunities where some of the characteristics are similar and some are different. Deciding what company is the right fit is sometimes a difficult task, but the first step is finding the opportunity.
There are five common methods used to find potential acquisition targets.
1) Develop relationships with owners: Picking up the phone, calling an owner and asking if they want to sell their business is not generally received very well. Asking them to have lunch to discuss the industry is a better approach. When I was more involved with purchasing companies, I would develop relationships over years not weeks. The sale of a business is an emotional decision in addition to a financial decision.
Attending industry association meetings and events is another way to begin to develop relationships. You already have a common bond as the challenges you face in everyday business are some of the same challenges they face.
2) Speak with vendors and other industry contacts: If you are looking to grow through acquisition, let people know. Vendors can be particularly helpful. Suppliers and other vendors don’t want to lose business if one of their customers is acquired by a company they do not do business with. They have already built the relationships with the companies and usually know who is getting close to selling.
3) Contact industry brokers: There are several companies in the industry like ours who help owners sell their business. Some owners just want a professional handling the business sale. Brokers in this industry use a targeted approach to a sale. We typically only contact prospective purchasers who we know are good candidates as we do not want to get word on the street about the company sale. If we don’t know you are a viable candidate, then we may not contact you.
4) Advertise: If you pick up any industry publication, you will see advertisements for companies looking to acquire businesses. The advertisements are typically from the multi-state companies as their target area is larger than a smaller acquirer. A better approach for a smaller company is to send a letter to the owner letting them know that you are looking to acquire businesses. Caution is advised in crafting the letter to make sure you are not offending an owner by saying, “We want to buy you out.”
5) Search the Internet: There are several business sale sites on the web. Two that I have used are Biz Buy Sell http://www.bizbuysell.com/ and Merger Network http://www.mergernetwork.com/ . These sites enable you to set the criteria of the business you would be interested in and you get an e-mail if something comes up.
It is a very rewarding experience to acquire a business and see your company grow. Good luck and good hunting.