Once you have made the decision to buy, it may be hard to find a company for the purchase. The first thing to do is to get the word out – in your surroundings and among the key actors in the world of mergers and acquisitions. Then, look in these places and, more than likely, you will find the best buy for you:
1. Gather information and ask around
First of all, get to know the industry that interests you, contact the professional association of the sector, speak with its leader and show him or her your interest, ask them to let you know if they hear of any company for sale.
2. Directly contact business owners
Another alternative is directly contacting the owners of the companies that interest you. You will be pleasantly surprised. Over the years, I have called many business owners in name of clients who were interested in buying them and these calls have always been well-received. In fact, some owners have shown great interest. Many business owners love to hear that you want to buy their company. They feel flattered and are willing to sell.
3. Use the internet
Another way is to put an ad on the internet, on corporate buying and selling websites. In these websites, there are a lot of ads for selling but very few for buying. This means that your ad will stand out and will provide you with a lot of leads. It is much better to have companies come to you than for you to go to them. This will increase your negotiation power.
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4. M&A banks
Of course, it is important to make public your desire to buy a company. Head to M&A banks. There are not that many (ONEtoONE Capital Partners is one of them) and are easy to find on the internet. However, you should show them real interest in buying because bankers like those who show true interest and will not want to waste time with those who are not serious. The advantage of contacting one of these entities is that they have sale mandates and the seller has paid them so that they make a sale notebook and create documentation about the company, meaning that they will be able to give you a lot of information.
5. Lending entities, such as banks and venture capital firms
Risk entities, such as lending banks or venture capital firms, are also an amazing source. They know the companies for which the business owners are close to retirement or where they are overwhelmed and are looking to find substitutes to take on the company leadership.
If you are looking for companies in crisis, ask around at these banks. They have many of them as clients and will be happy to look for an alternative leadership.
The aggressive debt of companies and the fall of revenues and EBITDAs (earnings before interest, taxes, depreciation, and amortization) provoke many companies to have difficulties when facing the debt. In these circumstances, banks find that these companies are the most willing for a change in leadership.
The banks are aware that if a company is insolvent, it will go into bankruptcy soon and they will lose most of what they have loaned the company.
Therefore, to avoid this situation, financial entities are taking control of the situation and are forcing business owners to oblige them to sell their company with the goal of recuperating most of the amount loaned.
Speak with venture capital firms that are focused on your sector. Most will have sectorial preferences. You can find them at www.webcapitalriesgo.com.
If you are looking for small companies, you can speak with the Chamber of Commerce in your area or with a broker.
Other actors that can show you companies are law firms, financial offices, or auditors.
Do not forget about head hunters, those to whom financial investors hire to find an executive for their company. In these cases, you are the last in coming to the operation and, even though you can get a percentage of capital, your negotiation power is much less.
If may seem like a lot of work having to do a search, but as the saying goes, “no pain, no gain.” Behind this search could be an opportunity that cannot be matched. If you do not like your current situation, do not conform; create your own destiny.
Do not overlook the company you are working for at the moment. You may be in an ideal buying opportunity, but you did not realize it. Appearances fool and maybe, while you look for an opportunity outside, owners of the company where you work are secretly looking for a buyer. You will not be the first executive to whom it happens.
This article was written by Enrique Quemada, President of ONEtoONE Corporate Finance.