How an acquirer will assess and value your business

MD2MD asked a number of local business leaders to come and talk to its’ members on how businesses are viewed by external financial and commercial professionals.

We were delighted to welcome Dr Mike Sweeting of BCMS/Acquisitions International, who spoke to the group about how an acquirer may assess and value their business.

Mike shared from his experience on both sides; buying and selling, the main attitudes of a buyer looking to purchase a company, the big questions they will be asking themselves and their imperatives as part of any transaction.

Some examples include:

  • What are the biggest risks I run here?
  • How can I integrate the business into mine?
  • How experienced in mergers and acquisitions are the vendors?
  • The return on our energy, money and focus has to be really worth it.

Buyers will use several different methods of evaluating a business, and will be looking to obtain a good return on investment; hopefully within a 3-5 year timeframe.

They will be looking for positive modifiers to identify potential companies:

  • Rarity Value
  • Niche Market
  • Good IP
  • Cash generative business
  • Reliability of revenue
  • Multiple revenue streams

However, negative modifiers which could identify risk may include:

  • Litigation
  • Vulnerable to new legislation
  • Shareholder disputes
  • Vulnerable supply chain
  • Dependence on a few customers, people, offerings

Mike then went on to share many useful tips with the group of Managing Directors on how, when looking to sell their company, they can lift the value by managing an acquirer’s perceived risk, by putting emphasis on the future, by dealing with the right kind of buyer, and by controlling the deal environment.

BCMS Corporate Ltd was established in 1987 and is a market leader — currently selling a UK private company every 4 working days. For more information on this subject, go to the BCMS Corporate Ltd website.

Bob Bradley

Bob is a specialist in running high value added service businesses, having run five such businesses as General Manager, Managing Director or Chief Executive. His last employed role was as Chief Executive of a £16M, 200 person family owned business having previously been Chief Executive of an AIM listed company for which he raised £5M funding and which he grew from £4M to £12M in three years through two acquisitions and organic growth, and a corporate PLC subsidiary where he was Managing Director responsible for delivering £10M profit on £45M turnover through 450 staff.

Bob is now following a portfolio career providing entrepreneurial business leaders with mentoring and coaching around business leadership, business growth, merger integration and exit planning.

Core to his portfolio is MD2MD. Having experienced for himself the value of having a strong sounding board of fellow Managing Directors he founded MD2MD in 2004 to provide groups of business leaders with a confidential environment within which they can support and challenge each other to raise their game as leaders and by doing so improve the success of their organisation.

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