A 7-step plan to finding buyers for your business
A roadmap to creating and evaluating a shortlist of buyers, and pitching them on buying your business.
In a dream scenario, you get the call out of the blue from the big player in your industry. It's come from the CEO directly. They have a reputation for doing M&A and paying good prices. Easy peasy.
Sadly... this is exception not the rule.
If most cases, you have to put in serious effort to get multiple, high-quality potential buyers for your business.
Why this matters
Having multiple, high-quality potential buyers for your business is a massive game-changer – for both the chances of getting a sale done, and the price you will get.
The right buyers will:
- move quickly
- pay a higher price, and
- give you better terms.
And if there are more than one of them, they will bid up the price against each other.
So running a great process to find buyers is a very, very high-value project.
The process is similar to sales, or raising funding if you've done that before. You start with a long list of potentials at the top of the 'funnel', which gets slowly whittled down to a few serious buyers.
Here's a seven-step framework for making this happen.
Step 1: Decide if you need an advisor
M&A advisors (also called brokers or corporate advisers) will support you through the sale of your company.
Perhaps the most valuable thing they do is help you find you buyers.
The best advisors are specialists in your industry. They know who is in the market to buy a company like yours right now, and they have personal relationships with senior decision-makers who trust them to bring deal to them.
So in a few phone calls you can have meetings set up.
But... if you feel you can do this yourself, you will save yourself a lot of money in fees. You can either (i) not hire an advisor, or (ii) only hire them once you have buyers in place which reduces the fees.
If you do have an advisor, they will hold your hand at each step of the process, providing advice specific to your company and industry.
It's your call – hopefully by the end of this article you will be clearer on which path you want to go down.
Step 2: Build a long-list
Like any sales process, you need to build a long-list of potential leads.
How to get started?
Acquisitions are made to deliver of one of six strategies. You can use these strategies for inspiration for where to look for buyers.
These strategies are:
- Buying out a competitor
- Launching in an adjacent product
- Entering a totally new market
- Integrating the value chain
- Financial only (like a rollup or PE buyer)
- Buying some unique audience, IP or team.
These strategies are broken down in more detail in 'The SIX strategies that drive M&A', with worked examples to guide you through each of the strategies.
This is a great starting point for your research. Go through each category, and think who might be appropriate. For example, going through these in turn:
- Who are you biggest competitors? Is there anyone who you are disrupting who might be worried?
- Who sells different products to the same customers as you?
- Who sells the same product as you but in another country or in a different market?
- Who are the big players in the your value chain, like your suppliers or customers?
- Who could you imagine paying for your customer base? How could your tech or other IP be used in another way or in another industry?
- Which PE houses or other financial players are buying up players in your industry?
Be inclusive - we will evaluate the buyers in the next step, so for the moment anyone is fair game. Add them to a spreadsheet, or you use your company sales tracking / CRM software (but be careful who might see it!).
This is a good place to get help from a junior member of your team. Having some help will allow you do the research more thoroughly and you can disguise it as research for another project.
Step 3: Evaluate your list
Now you have a (hopefully very long) list of potential buyers.
You don't want to spread the word to the entire industry that you are considering a sale. And many of these won't be suitable as buyers of your business.
So let's do some filtering.
You want companies who are big enough to consider doing M&A in the price range that you'd consider selling. Ideally with experience in doing acquisitions too.
Here are some things to look for, and where to look:
- Financial means: You want the company to be big enough to pay your ideal exit price without having to significantly extend themselves. If they're publicly traded, check the market capitalisation. If you can find published financial statements, check these out. You're looking lots of cash and equivalents on their balance sheet – then they have the means to pay. High profitability and fast growth are good signs too.
- Size: If you can't find good financial information, softer but useful proxies are number of employees on LinkedIn, impressive customer logos on their website, or an impressive management team – but don't place too much weight on these.
- Recent M&A activity: Companies that are experienced buyers are much better acquirers than first timers. You should be able to find snippets of information about recent online. Bonus points if there are many and they are recent, the deals are for values similar to bigger than your expectation (so its not their biggest deal ever), and the strategy of the deal matches with acquiring you.
- Team: You should also be excited if they have an M&A / Corporate Development team in house. If you can see ex investment bankers in senior roles... bingo! That's a major investment, so they are serious about acquisitions.
- Relationship: Do you already have a relationship with them? That could be a marketing partnership, a product integration, or just a friendly relationship between CEOs.
You can run this like a simple scorecard in your spreadsheet, giving a point for each of the above they they tick.
If your advisor has drawn up the list, push them to explain how they qualify each of them as suitable. Some advisors will make a super long list to show how much work they've done and justify fees, but you want a short and tailored list.
You then need to decide where to draw the line.
It's hard to give generic advice for how many companies you want on your shortlist. It will depend on your company and your industry. Aim for at least 20 to start with.
Step 4: Prepare the pitch
Now you have a shortlist of potential buyers. Each has a clear strategy for why they could buy you, the means to do so and hopefully a track record of deals too.
Now you need to prepare your pitch to them.
But what do you say? There's a lot to unpack here, so we've broken this off into a separate article which you can read here: How to pitch to a potential buyer.
That article has a worked example and template text to use at each stage of the message.
Here's the skinny: You don't need a big pitch deck at this stage. You want a short, personalised message that specifically says that you're for sale and gives them a clear pitch on why they should buy you.
Step 5: Find your contacts
Now you have your custom message for each buyer on your list. But who do you send it to?
You have three options, which should be easy to find on LinkedIn:
- Head of Corporate Development. This is the person responsible for M&A within the organisation. Speaking to potential targets falls under their remit. If the company has one (not all do), this is a natural target.
- CEO. Going in at the top is a good strategy. M&A is expensive and risky, so your deal needs support from the CEO to succeed. If you already know the CEO this is ideal. This is less appropriate if you're targeting a very large company though - emailing Satya or Zuck might not work!
- Sponsor. Every deal needs a sponsor. That's a senior person within the buyer who you would be working closely with post-deal. It can be the CEO directly, but often it's the relevant regional head, or the head of the business unit that you would slot into. They are key to champion the deal internally and help the buyer to evaluate the strategic benefit and synergies.
- Personal contact. If you know somebody at the company, that can be a useful entry point. They can be more junior, but should still be senior enough to introduce you to one of the three people above.
If you're struggling with finding email addresses, try a tool like Snov. It scrapes websites to find their standard email naming format (a.smith@ / adams@ / adam.smith@). You can use that to guess the email with about 80% precision.
Step 6: Outreach
We've seen people try to mail merge these to send 100 contacts at once. We'd recommend a more thoughtful approach.
Each contact should be tailored to the target more carefully than just swapping names in a mail merge. And if you've been mindful with your filtering, you shouldn't have a huge list to contact.
It's also nice to send a few, see what the response are like, and then adjust from there.
You can then sit back and see what responses you get.
Step 7: First real contact
Then the replies start rolling in! Congratulation, you are officially in an exit process.
If you've done this right, you should get a very high response rate - at least 50%. That's because the targets could genuinely be interested and you've reached the right person with a tailored pitch.
Prepare yourself for a lot of Nos. Doing an M&A deal is rare for many companies, and you need to have contacted them at exactly the right time as they consider the strategy that you fit. So don't be deterred.
When do you get a Yes... what happens next?
The CEO might refer to their M&A team to follow up. Or perhaps to the Sponsor to have a chat to you next (as they know your market best), or both.
The next step is likely a phone call or a face to face meeting, for them to learn more about you, the business and why you are considering a sale.
More on that to come...