An important mission to accomplish very early in the sale process of a middle market A&D company is to define as best as possible the type of buyer you want to have purchase your company. Of course, the price you want for your company is important but there are many other criteria for you to consider. For example, is it important that your management team remains intact, do you want the buyer to not move your company elsewhere, is it important that you are comfortable with the buyer in terms of compatibility, or is it important that the buyer share your vision of the future for your company.
A key part of your decision may be whether you prefer a strategic or financial buyer, a topic which we discussed early in 2022 in Deal Note® 008. A strategic buyer will likely be an entity that is an operating business looking to add capacity or capability or customers or intellectual property developed by your company. A financial buyer will likely be a private equity firm looking to create a new platform or strengthen its current holdings in some fashion.
Your investment banker will play a key role in helping you decide the type of buyer you want for your company. A good middle market A&D investment banker should know the financial buyer (private equity) community very well and be able to select those that have a focus on your type and size of business and have the financial capacity to readily purchase your company without saddling it with a lot of debt, for example. Likewise, your investment banker should be familiar with the strategic buying community and be able to select potential buyers that could meet your needs as a seller. These buyers are potentially competitors or customers or operating companies that are looking to grow through strategic acquisitions.
In summary, an important discussion to have early on with your investment banker is what kind of company you want to sell to and how that decision might impact the value that you may receive for the business.
Have a great day everyone,
Bruce Andrews
Partner
