Divesting – Finding the Right Buyer for Your Business

Updated: May 31, 2024

Key Insights

Buyer types vary significantly, targets should align with owners’ key objectives.
Efforts should be focused on the most qualified counterparties.
Document the investment thesis for the buyer with numbers and the strategic rationale (cost savings, commercial benefits, etc.)
Evaluate parties and narrow the focus before starting detailed due diligence.

You Only Need One

It’s not to say you cannot create some value from a targeted sales process with a small group of qualified counterparties, but its important to take note of the reality that you only need one buyer so its better to focus resources on the most qualified counterparties than chase down and enable due diligence from a wide range of counterparties, whom could be contacted later if priority bidders do not move forward to acquire your company. Going back to buyers previously contacted provides a weak negotiating position.

Types of Buyers

Consideration should be given to the following types of prospective buyers as part of a well-planned go-to-market strategy:

Strategic Buyer – Buyers who can realize post-acquisition combination benefits not previously realized by the target business. This includes public companies who will often pay a premium if the acquisition is accretive to their earnings per share.

Private Equity Groups – Generally financed by large pension funds and banks as well as financial sponsors who finance each specific opportunity independently. This includes search funds that may be taking a targeted approach to a specific industry and play a more active role in the day-to-day.

Family Offices – Buyers who invest only the family’s capital without any outside equity. Increasingly we are seeing family offices raise funds to allow external equity to invest alongside them.

Management Buyouts – Executives seeking an equity opportunity and/or existing management teams can facilitate an orderly sale with minimal disruption to the business and an increased likely of long-term retention

Selecting the Right Counterparties

Not all buyers are created equal or operate on the same timelines. Determining your specific objectives from both a financial and non-financial perspective will help narrow the list of prospective parties. Management continuity is valuable to all buyers and your individual objectives could be relevant in evaluating between bids from private equity groups with different approaches and a strategic buyer. It is a good idea to list your objectives so that they can be applied to prospective counterparties to assess fit prior to engaging and facilitating diligence requests.

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Experience in M&A, corporate finance, business valuation, and private company operations, Bonfire Capital aligns stakeholder interests and delivers exceptional client experiences. Our collaborative approach, rooted in advising and managing private companies mitigates transaction risk. We bring a flexible approach to mandate scopes and are recognized for being nimble and relatable.