Do you dream of selling to a strategic acquirer?
A strategic acquirer (or simply “a strategic” in M&A parlance) is a company with assets that become more valuable if they own your business.
Here are some of the most common reasons a strategic acquirer may buy your business:
- To win more business from their competitors
- To differentiate their offering
- To enter a new market
- To capture more market share and therefore raise prices and be more profitable
- To improve profit margins by spreading their overhead across more revenue
Compared to a financial buyer, you may find a strategic acquirer will offer a higher price for your business because they can see a quick return on their investment from the synergies that come from owning your business.
Getting Your Foot in the Door
It’s one thing to know you want to sell to a strategic, but the prospect of penetrating their inner sanctum can feel like trying to break into Fort Knox. The CEO of a Fortune 500 doesn’t advertise their email address, and your call to their office will be redirected by an administrative assistant.
So, where do you start?
In a recent Built to Sell Radio episode, Touraj Parang described the typical setup inside a Fortune 500 company.
Parang knows his stuff. He spent years building and selling companies before joining the acquisitive giant GoDaddy as a leader in their acquisitions group, where they purchased dozens of companies during his tenure. Here is Parang’s overview of the people at a Fortune 500 company that are involved in acquiring a small to medium-sized business:
- Corporate Development Leader
A big company usually has a “Vice President, Corporate Development” that is responsible for evaluating a potential acquisition’s strategic fit. Parang refers to these individuals as “corporate cupids” because they act as matchmakers to introduce the business owner to the right business unit leader inside their company.
A corporate development person is most likely to take your call, but they are usually not the final decision maker on an acquisition. For that, you need to get to a business unit leader.
- Business Unit Leader
A business unit leader is responsible for a division of a large company. Business unit leaders usually have their own P&L and therefore look for acquisitions that can help them sell more of their products and services or cut costs. To get the attention of a business unit leader, you must develop a strong investment thesis to highlight the value they stand to gain by acquiring your company.
The business unit leader will likely need to get approval from the CEO and/or board in the case of larger transactions. Therefore, the business unit leader must believe acquiring your business will help them meet their targets and be willing to spend their internal political capital to defend their case.
- The CEO and Board of Directors
The CEO (or board of directors in the case of a larger transaction) will often play the role of skeptic. The CEO will question the business unit leader’s assumptions and make sure their direct report has thought about all the hidden implications of making the acquisition.
You need to arm the business unit leader with the ammunition to defend their case with the board and/or CEO.
If selling to a strategic acquirer is your goal, start early by cultivating a relationship with the business unit leader with the most to gain from acquiring your business. If you are having trouble getting their attention, reach out to someone in corporate development that can make the necessary introductions.