Proactive Acquisitions: Facilitating Deals with Quality Passive Owners

2018, 02 Jan | In Uncategorized

Proactive Acquisitions: Facilitating Deals with Quality, Passive Owners

By proactively discovering passive sellers at reasonable valuations – while working well with more traditional sources  – acquisition strategies can facilitate mid-market businesses elevate  status to a more dominant role in the industry.

When searching to acquire new companies, business owners can approach listed companies or – with the development of deal flow – can target businesses that may not be currently on the market. This approach offers a plethora of benefits over the more traditional competitive auction process.

Not everyone knows they’re ready to sell … until an offer comes

One of the benefits of targeting a listed company is that you know with certaintly – that the business owner has the intention of selling. However, that may not mean that all other unlisted companies are not viable. Some business owners are potential passive sellers, which means that they might not actively auction their company today but they’d most likely consider offers from serious buyers.

Find that perfect match

Developing your potential acquisition pool, by developing an acquisition program, offers one the ability to find a company that’s deemed a perfect fit, rather than just settling on the best company out of what’s available.

If and when you acquire the company, this may not only be a benefit to you, but it’ll likely decrease the chances of the target company turning to an auction process as they will see you as the perfect fit for their transition.

Being proactive gives you more control

In a traditional auction process, the vendor and agent have immense control over the whole process. However, control shifts to the acquirer with a more proactive approach.  With increased control over pace and process, one will be able to dedicate more time to due diligence as one works developing and creating a forging relationship with the vendor and management.

A profound insight offered through acquisition programs

Through an acquisition program, one may gain access to specific pieces of information that aren’t publicly available. This information can help you determine the consolidators and sellers of a given industry.

This process can also provide valuable insight on the future extent of an industry roll-up strategy. With a more reactive approach one may work with the target universe for 5 years. That time period can often be shortened to a year, with a proactive approach, which will help one to decide whether to continue to pursue acquisitions and secure financing or if one should shift strategies.

Deciding on proactive acquisition alone will not dictate success

Propriety acquisition opportunities offer a bevy of benefits for mid-market businesses, including targeting opportunities at better valuations (while also minimizing risk associated with an auction process). However, to ensure success, one must do more than just saying one is committing to this strategy.

Building an acquisition program requires planning, resources, and skills, to increase odds the process is designed with your goals and market realizations in mind. However, once properly developed and set into action, you’ll find that pursuing a proactive acquisition strategy may catapult your mid-market business into an industry juggernaut.