M&A Seller: How to Create Target Lists
The target list for a Seller in an M&A deal is a bit different than Buyer’s target list due to one key aspect: Seller’s main concern is Buyer’s ability to close a deal. In other words, does Buyer have the dough?
That’s not to say you as Seller should be blasé about who buys the company. Even though you’re selling, you likely still have some sentimental or financial stake in the company’s success. Here are a few points to consider when listing targets:
Can the new owner continue the company’s successful operation? If a selling owner plans to stick around for a period of time as an employee — especially if she plans to accept some kind of contingent payment (a note, or stock, for example), as part of the sale — she wants to make sure the company continues to be successful in order to increase the likelihood of collecting that contingent payment.
Does the target have a history of taking care of an acquisition’s current employees? Most Sellers (especially those who are retiring) want their companies to continue to be successful for the sake of the employees. Does your potential Buyer’s record show a history of integrating existing staff into operations or canning everyone and starting over with its own people?
How will the new ownership affect the company’s legacy? Even if you aren’t sticking around post-transaction, you probably want to see your company continue as a going concern.
If you’re selling a company with losses, look for a strategic Buyer (a company seeking to fold another company into its operations). Financial Buyers (such as private equity firms) aren’t likely to be interested in a money-losing enterprise.