What Buyers Value In A Target
MergersCorp
Award Winning Global Investment Banking Firm with focus on Corporate Finance & Cross Border Mergers and Acquisitions
Anyone who wants to buy an existing business can decide to do their search or hire a broker to help them find the perfect business for their needs. Every business is different, but there are certain metrics that potential buyers usually consider regardless of the type of business they’re looking at. Below is a list of what buyers value in a target:
Buyers normally look at a company’s financials before making a decision. This includes the balance sheet, profit/loss accounts, and income statements for at least three years. The share capital, working capital, revenue, and profits/losses generated by a target company must all be checked before a decision can be made on whether to buy it or not. A loss-making business may seem attractive to a buyer if the company has a lot of assets and few liabilities.
2. Scalability
One of the most important parameters that buyers always consider is scalability. Nobody wants to buy a business that has stagnated and has no growth prospects. The ideal target business should be easily scalable with a capital injection from the new owner. It should be possible to open new branches in other locations, diversify the product range, and still generate a decent profit.
3. Brand Recognition
The reputation of a brand is an important asset that can help a business grow. That is why buyers always consider the brand recognition and reputation of a business before making a decision. The stronger the brand, the higher the prices buyers will quote, and vice versa. This is because the buyer will not be forced to spend more money to market the brand.
4. Diversified Income Sources
One of the most important factors of consideration for buyers is the diversity of the income sources of a business. Businesses with multiple income streams and many customers are more attractive than businesses with a single income stream. Buyers also avoid businesses that depend on a single customer for 15%, or more, of their revenue. A diversified income stream, therefore, can attract more buyers who are willing to pay a higher price for the business.
5. Management Team
The ideal business should have a lean and efficient team of professional staff. The business should be able to run efficiently for months or even years without the involvement of the owner. Nobody wants to buy a business that depends on the owner because the business may fail once the transfer of ownership has gone through. The roles of each member of staff should also be clearly-defined to ensure there is no overlap of responsibilities.
6. Growth Projections
Before a buyer can make an offer to buy a business, they must check the growth forecast and strategic plan of the target. This will answer many questions, such as; does the business plan to grow? Is the business scalable? How much will the target business generate in profits after three years? Is the business sustainable? These are all critical questions that can be answered by looking at the strategic plan of a business and analyzing the revenue and profit projections.
About MergersCorp M&A International
MergersCorp M&A International is an international business brokerage and consultancy company with a team of business experts who serve both buyers and sellers. MergersCorp M&A International can help you find a great deal when you want to buy a profitable business anywhere in the world.
For more information about Investment Banking, Cross Border M&A, and Buying and Selling a Business visit: https://www.mergerscorp.com
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