It’s long been part of the vocabulary of M&A specialists and business brokers advising their selling clients, that the best way to maximise the sale price is to engage with strategic acquirers.
Strategic acquirers are those businesses who already own larger ventures in the seller’s industry and who look for certain assets that can be deployed in their own venture to make them more profitable or achieve faster growth. They will also consider transactions that help them fast track their entry into new markets and expand existing product offerings.
The average premium for a strategic acquisition is around 13 to 20 percent compared to a non-strategic transaction, but the premium can be significantly greater depending on how much the sellers’ assets will add value to the acquirer’s business as well as the acquirers’ access to finance.
To best understand the most common reasons given for an acquisition, we have compiled data from hundreds of announced transactions between 2016-2020 to see what motivated strategic acquirers. This is summarised below:
Herein we take a closer look at these motives, outlining what really drives strategic acquirers to make purchasing decisions.
Product Expansion / Diversification (26%): Most strategic acquirers are seeking access to new product or services ranges, to rebrand or the capacity to lower risk through product diversification.
Customers / Channels (22%): Many strategic acquirers seek access to a broader range of clients or channels to access those clients.
Geographic Expansion (18%): Enabling the buyer to access new markets and test new marketing opportunities is a strong motivator for strategic acquirers.
Consolidation (17%): Achieving revenue and cost synergies and benefit from economies of scale is a powerful buyer motivator.
Defensive (7%): Some strategic acquirers act to strengthen market position and protect existing gains while removing competitive threat.
Intellectual Capital (5%): Strategic acquirers buy some companies to access or utilise new technologies, methods of other intellectual property.
Market Share (3%): Strategic buyers often seek to achieve greater market penetration by acquiring rather than building products and by obtaining greater distribution muscle.
Key People (3%): Buying in expertise to achieve great knowledge, focus or reputation motivates some strategic acquirers.
While it’s clear that the best route to exit for company shareholders and business owners is through a strategic acquisition, it takes considerable planning to contemplate. As part of this, issues such as considering who the strategic acquirer(s) may be, how to get on their radar and how to structure a business in such a way to best appeal to such acquirers all hold importance.
Groves & Partners are expert business transaction advisors and valuers, with significant experience in partnering with business and companies to best prepare them for a strategic sale and a proven track record of executing strategic business sales.If you are considering selling your business and would like to know more about how we can work with you to improve value as part of a sale and how we can act for you to gain a great sale outcome, contact us on 1300 892 717 (+61 2 7208 7970) or email info@groves.com.au.