How to market a company for a merger or acquisition
When business owners turn around and sell their company, they want to make as much money out of the deal as possible. But how do they ensure that they get a good price for what they have built?
The same way any salesperson manages to successfully sell a product: through marketing.
Many business owners don't realize it, but this rarely-mentioned aspect of the mergers and acquisitions process is actually quite important. As noted by a recent article on Inc.com, the best marketing strategies are built around what contributor Bruce Condit calls "the four-P's"—product, place, promotion and price.
- In this case, the product is not actually what the company makes, but the company itself. But like any other product, it must be transparent and free of defects. No one wants to buy a car only to find out later that there is a problem with the engine. It follows that no one wants to buy a company and later discover that it actually has some hidden financial issues that threaten future profitability.
- The place is not the physical location of the company, but rather the subset of the market where it will be sold into. Given how global the marketplace has become, Condit notes that it is much less likely for a local economic downturn to hurt a business's fortunes if demand from abroad remains strong. The actual marketplace where the business ends up is more important.
- Promotion is crucial. Business owners need to do their research to ensure that they know how to target prospective buyers, based on what these individuals and organizations are seeking. It is not enough to simply wait for someone to buy your company.
- Finally, there is pricing. It is often assumed that business owners can simply get a professional evaluation to determine a good price. But, as Condit argues, that approach has some pitfalls associated with it. For instance, most evaluations take into account the economic conditions at the time. While this is useful for someone who wishes to know how much their company was worth yesterday, it only has so much value in the future. The economy changes all the time. More to the point, potential buyers are going to be looking at how this technology acquisition will benefit them in the long run. The company's long-term viability is just as important as its short term performance. To get a better figure, Condit suggests collecting potential buyers and holding a silent auction.
It is never easy to sell your company on your own. But a mergers and acquisitions firm can help business owners navigate the market and get the most out of what they have built.