Who will the buyer of your business be? An overview of why a competitor or supplier may buy your business.

As brokers and advisors on the sale and merger of medium-sized businesses, our clients frequently ask us: “who do you think will be the buyer of our business?”

It’s an important question to ask, as in order to complete the sale or merger of a business, there must be a willing party on the other side of the transaction!

In our experience, buyers mostly fall into one of a number of categories – two such categories are competitors (including similar businesses) and suppliers. In this article, we look at why competitors and suppliers may consider buying your business.

Suppliers

Why would one of your suppliers want to buy your business? 

Typically this type of buyer may have interest if they are actively looking to expand downward in their supply chain. For example, they may manufacture coffee machines which in turn are sold to wholesalers (such as your company). Following this example, the coffee machine manufacturer may see benefit in increasing their margin and profits by expanding into the wholesale market by acquiring your business.

In our experience, this is common in circumstances where there are international suppliers which provide goods to agents in particular markets. When those agent companies consider selling, the international supplier will often see value in acquiring the agent to expand their local presence.

Competitors and Similar Businesses

There is often fear (sometimes for good reason) surrounding selling a business to a competitor or similar business. After all, it is a dangerous exercise to provide confidential business information to one of your competitors!

Noting this however, competitors and similar businesses (we define similar businesses as being businesses that offer similar products or services to you but who don’t compete directly with you) are often the best and most likely buyer for a business.

Competitors and similar businesses are good buyers as they can often gain quick and easy strategic advantages from buying another business similar to theirs. This could include moving into new geographies that they don’t currently service or picking up new customers which have been loyal to you for many years.

Further, competitors and similar businesses often better understand the nature of your business and how it works which can make the process of selling to them significantly simpler.

Find Out More

Groves & Partners are expert business transaction advisors and valuers, with significant experience in acting as brokers on the sale of medium sized companies, and in providing pre-sale advice to business owners.

If you are considering selling your business and would like to know more about how we can work with you, contact us on 1300 892 717 (+61 2 7208 7970) or email info@groves.com.au.

Written by Stephen Groves

Related

Introduction to Valuing Intangible Assets

Intangible assets are assets without physical substance that provide rights or economic benefits to their owners.  Intangible assets include goodwill, intellectual property, marketing related assets…

Read More