Of all the steps that are involved in selling your business, identifying the right buyer is probably the most emotionally charged. The type of buyer you choose will ultimately determine how the business proceeds when you have stepped down or away –and if you have spent a lot of time and effort in building your company up, you will usually have some strong ideas about the future for it.
There are typically three different types of buyers identified in the mergers and acquisitions process: financial, strategic, and operator. Here, we will discuss each and give you an idea of what to expect from them.
For a financial buyer, the motivation is a defined monetary return on investment. They are looking to buy your business as cheap as they can make a couple of changes or hold on to it for a few years, and then resell for profit. This might include private equity firms, investment groups, and other more classic investor personalities, and with this type of buyer, you may have the opportunity to stay on as operator/manager.
This type of buyer sees something in your business that they believe can bolster their own company. That might be a specific process, a unique product, a customer list, or even a geographic location –the key is that you have something unique that the buyer wants. This will mean that you have the opportunity to charge a premium –after all, your company is now a key part of their business plans so you can enter the negotiation from a position of strength.
An operator buyer is essentially someone that wants to take your role as owner/operator. They like the business, believe that they can slot themselves into your role without any problems, and want to take on the challenge. Ultimately, they will then do as you are doing now: sell the business for a profit –but that is not necessarily the primary goal. Short to medium term, this buyer wants a steady income and decision-making power.
So Which Is Best?
If you want to see your business continue without much disruption –so your employees and customers will still be looked after, then an operator buyer is the best choice. Some changes will inevitably be made, but nothing seismic should occur and operations will continue as normal.
For maximum payout, you can try to find a strategic buyer. This is more likely in a digital health company than in a retail pharmacy business, although if you have a particularly strong site and loyal customer base then this can be leveraged to your advantage.
Financial buyers will often give you the opportunity to stay on, so if you are not 100% ready to step away from the business then this is possibly the way to go. Be aware, however, that if you have spent many years answering to yourself and only yourself, it can be a bitter culture shock to suddenly cede that control to a stranger.