Your client’s M&A advisor should begin trying to identify potential buyers as early as possible. The search should be extensive and go on right up to the cut-off date for the receipt of letters of intent or expressions of interest.
Most advisors have access to information about recent merger and acquisition deals. They start the buyer search by looking at those transactions to find companies that are actively buying businesses in a certain industry.
Research should also be done to see if there are any public companies in acquisition mode that might be interested in your client’s industry, customer base, geographic market, products or services, etc. Private equity groups that invest in businesses can be another good source of potential buyers, if your client and the M&A advisor decide they may be suitable.
Your client is part of the buyer search too. She should tell the M&A advisor about anyone who has approached her expressing interest in the business and consider customers, suppliers, and even competitors who might be interested. While it may not be prudent to disclose plans to sell to customers, suppliers, or competitors, the pros and cons of approaching these groups should at least be explored. You may also have ideas to suggest.
List Of Potential Buyers
During the buyer search, your client’s M&A advisor will develop a list of potential buyers using several industry data sources and databases. This information helps uncover potential buyers that are qualified to do the deal and potentially a good fit with the seller’s requirements.
Done properly, the buyer search might uncover dozens or even over a hundred possible buyers from around the world. (Many foreign buyers are active in acquiring North American businesses.) If the seller wishes to keep the pool of potential buyers small, the M&A advisor will seek and identify the best options.
The more exhaustive the search, and the more potential buyers approached, the better the chances are of having multiple interested parties. The more interested parties there are, the greater the advantage for your client. When buyers know there are multiple interested parties, they are more inclined to improve their offers (letters of intent).
The M&A advisor should review the list with your client so that she can eliminate potential buyers that she is not comfortable with. Finally, if the M&A advisor has any doubts about the capability of specific potential buyers to do the deal, he or she will conduct additional research to determine if they qualify.