Using the Acquisition Continuum
In a prior article, I talked about how it’s unlikely there will be a bidding war if you should ever put your business on the market. Part of the reason for that is that it can be difficult to attract the attention of multiple strategic buyers at the same time. The better bet, therefore, is to try and strike a deal with the best fit, which is usually a strategic buyer.
If only there was a way that you could actually create the market for the ideal strategic buyer for your company-
It turns out, you can!
The best way to find the perfect buyer is to actually partner up with them first.
Let me explain.
Smart companies use the “acquisition continuum” where they can use partnership opportunities – such as marketing partnerships and joint ventures – to pave the way for future acquisitions. It’s like a sales funnel where you can look for acquisition targets. Working with companies in these ways allows you to identify good strategic fits for your business.
But the opposite is also true. If you’d like to get the perfect strategic buyer interested in purchasing your company, you should look for ways to create economically viable partnerships with them as a way to prove the compatibility of your organization with theirs. In other words, if you want to find a strategic buyer for your business, make them a partner first. And frankly, if you can’t figure out a great and economically powerful partnership, it’s unlikely they would ever want to buy you.
The mistake so many companies make looking for a buyer is that they overlook this idea. They don’t think about how they can first establish their value to a strategic buyer to help stoke interest in an acquisition. Rather, they sit around and hope someone notices them.
For example, I was working with a boutique management consulting firm that happened to be looking for a buyer. The partners in the firm were smart and experienced, but they also realized that they needed access to a wider set of customers if they really wanted to grow the business. It was their assessment that the best way to gain access to those customers would be to get bought by one of the large global management consulting companies with existing relationships. Getting acquired by a strategic buyer like that would not only give their services a much broader client base to work with, but it would also give the partners a chance to take a few chips off the table.
When I asked the partners how they were approaching this process, they told me they had generated a list of the big companies they thought would be a good strategic fit for them. I then asked if they had ever worked with or partnered up with any of the companies on their list before. They told me that while they had tried a couple of times, nothing had ever worked out. Why then, did they think the company would be interested in buying them if there wasn’t a fit in terms of their products and services? They claimed it was a good strategic fit. Apparently not, I responded. After all, the proof is in the doing.
They finally understood my point. If they couldn’t find a way to create a partnership, why would the company ever consider them a good fit for an acquisition?
The end result was that the partners shifted from trying to find a strategic buyer to instead trying to build economically viable partnerships with potential strategic buyers with the goal of piquing the interest of one of those companies down the road.
If you’re looking for a strategic buyer for your company, the good news is that you can control your own destiny rather than waiting around for Mr. or Mrs. Right to come along and whisk you away. Go and start building relationships with the kinds of companies who might be interested in buying your company as a way to establish a profitable relationship that could eventually lead to an acquisition down the road.
