Who’ll Pay the Most?

By Dennis McCarthy – (213) 222-8260 – dennis@mbsecurities.com –

Welcome to the M&A Series.  M&A for middle market companies considering a sale.

In this video, I’ll address a frequent question asked by companies considering a sale, that is, which buyer, or type of buyer, will pay the most for my company.

In another video (“What is the Goal?”), I encouraged sellers to determine the goal of their transaction early in the process.  So, let’s say that we’ve determined that our singular goal is to get the highest price.

And further, let’s say you knew at the beginning of the sale process which buyer would likely pay the most.  That would make the whole transaction a lot easier, wouldn’t it?  You could go to that one buyer and be done with it.

But, not so fast!  As I described in the M&A Series video “Set an Asking Price?”, buyers won’t voluntarily pay a seller a premium for the value that the buyer creates with the acquisition.

A buyer will only pay a seller for that extra, synergy value if the buyer is forced to by competition.  So, the seller has to create that sense of competition.

And, there’s another issue.  Just how do you know your one buyer will pay the most?

You really don’t know unless you’ve “tested the waters” as they say, to find out what others would pay.

I’ve been a banker for many years and done many deals.  I’ve learned that M&A for selling companies is surprisingly unpredictable.

Sometimes, the best buyer is a direct competitor who can pay more because it’ll eliminate competition.

Sometimes, the best buyer is not even in the market now but wants to get in and will pay up to join the competition.

For example, many times the best buyers are from other countries wanting to get a beachhead in yours.

Often, the best buyer is a large, cash rich company that can pay whatever it takes to win.

I had one sale where the best buyer, a large cash rich company, had to withdraw from my deal just before closing because it itself was being bought out.  Again, M&A is unpredictable.

When my clients tell me they know who’ll buy their company, I listen politely but ask permission to go to a larger list of candidates.

I know that running a good, thorough sale process is the best way to find out just who’ll pay the most.

Please contact me to help your company to get the most from your M&A transaction.