Given the unparalleled amount of “dry powder” currently held by Venture Capital and Private Equity firms (investors put more than €1 trillion to work in Europe's M&A market during 2020 alone for the fifth year running) many companies in the marketing tech and services industry are, for the first time, being inundated with cold outreach from prospective buyers (or their bankers).
At ScaleHouse we’ve been talking with an increasing number of executive teams who have been approached by a potential buyer and are wondering if now is the right time to sell.
Our answer? It may or may not be depending on your firms particularly exit strategy, performance during COVID, sales pipeline and a myriad of other factors. But what we always advise these teams to do is HIRE A BANKER with experience in your sector (or business broker if your company is too small for a traditional banking firm) when you do decide the time is right to sell.
Here’s why (full disclosure….both Mike and I are licensed investment bankers through Oberon Securities):
- Unless your business is unlikely to sell (meaning, it is in distress and isn’t a good candidate for a turnaround), an investment bankers’ job is to market your firm to multiple buyers in the hope of achieving the highest valuation, and thus sale price, possible. Although it may be appealing to grab the first offer that comes along, higher sales prices are almost always achieved through a competitive bidding process, which investment banks facilitate and negotiate, on your behalf.
- Investment bankers have vast networks of both financial and strategic buyers in the verticals they specialize in representing (in our case, marketing technology, data and analytics). If you’ve worked in an industry for years, you might have a good network of fellow CEO’s or executives but it’s unlikely you’ll have a deep bench of contacts of potential financial buyers (such as PE firms) or buyers that you may be unfamiliar with due to geographical location or other constraints.
- Lastly, investment bankers have a highly defined and tightly controlled process that allows you to go to market anonymously (critical to ensuring your clients don’t get the jitters when they hear you may be selling) while expediting a sale. The average sale process is 6-8 months but can extend much longer if conversations with prospective buyers drag out, company data for due diligence isn’t readily available or negotiations become arduous. A banker's role is to prepare you for the sale process, effectively market your firm and get a deal done in the shortest time frame at the highest valuation.
Considering selling your company in the next 12-24 months? We’d love to talk more about opportunities to optimize your business NOW in order to achieve a maximum valuation and sale price when taking your firm to market.