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.

Written by Bob Bradley, founder of MD2MD.