There are some practical steps you can take to make sure global corporations know your business is a good prospect. By TOM McKASKILL
By Tom McKaskill
There are some practical steps you can take to make sure global corporations know your business is a good prospect.
If you have some really smart, well protected technology, a highly innovative process or hard-to-find deep expertise, you probably have the basis for a strategic sale to a global corporation.
However, as a small business you may find it somewhat daunting to tackle the task of putting yourself in front of a giant corporation. If you are like a lot of entrepreneurs who desire to sell their business, you would probably settle for a sale to a local national firm and take whatever EBIT multiple they offer.
But in doing so you are almost certainly walking away from a sale price that could be five to 20 times what a local corporation would be willing to offer. But how do you get in front of the big buyers?
First, you need to understand that large corporations often grow through acquisitions and they have very large M&A departments set up to do exactly that – buy businesses, often just like yours.
Next, think of the impact your strategic assets or capabilities might have on the right buyer. If you select your potential buyers well, you should be choosing companies who can make 50 to 100 times the purchase price over a five year period. Even if they pay you 10 times the conventional financial value of your firm, they still come out well in front. If you seriously have something to offer, you owe it to yourself to find a way of putting your proposition to the best of the potential buyers.
How do you make contact? Remember that they are always on the lookout for strategic acquisitions. Your job is to let them know you are up for the discussion.
You can start with the head of their M&A department. After all, that is their job so they should expect to be approached. You might also set up a meeting with the head of their local subsidiary since part of their task is to identify future acquisitions for the parent company.
Another strategy is to work through your local service provider, investment bank or business adviser. If you have venture capital, then ask them to set up the connection.
Perhaps you don’t want to be so obvious. That is, you don’t want to declare that you are for sale but you still would like to set up an informal discussion with potential buyers. You could use an independent third party such as a professional service provider to make contact for you. Alternatively, you might contact the potential buyers through their business development director with the objective of setting up a strategic relationship.
If they are interested, they will soon work out that it would make more sense to buy you and exploit the opportunity quicker rather than to have to scale back their efforts to match your resource level.
This is a time to be bold, pick up the phone and just make the calls. You will be surprised how open large corporations are to an initial discussion.
Once the door is open, you can take your time in building the relationship, finding an internal champion and getting ready for the deal of a lifetime.
Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the former Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia.
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