5 Ways Investors & Buyers Can Differentiate


If you have been in the market to purchase a home in the past 12-24 months, you know that home prices are surging due to a record low supply of properties coupled with sky-high demand. You may have been part of a bidding war or offered well over asking price if you are in markets like Denver, Seattle, San Francisco, Dallas or Nashville.

Investors and strategic buyers of successful middle market businesses are feeling a similar pressure to today’s home buyers. The demand for quality middle market businesses continues to grow while the supply has stagnated, pushing up valuations for quality deals 20-40% over the past five years.

The demand for quality middle market businesses is coming from both financial buyers like private equity groups plus corporate buyers who are looking to grow their businesses via acquisition.

Since 2000, the number of active private equity firms in the U.S. has increased 2.6 times. Assets under management (AUM) have grown 3.1x during this same period. Putting capital to work is top of mind for all private equity investors. Private equity firms are fundraising at a record pace and are anxious to deploy capital and deliver returns to limited partners.

As private equity’s presence has increased, GDP growth has slowed. Record corporate balance sheets have driven development teams to pursue “buy over build” growth strategies. Meaning that corporations are enhancing their businesses by making acquisitions of quality middle market companies instead of organically growing their product offerings and skills.

So, with increased levels of competition driving deal values to all-time highs, how can business investors and strategic buyers differentiate themselves in ways other than valuation?

For sellers of family and founder-owned businesses, it’s often about more than achieving the highest valuation for their business. In fact, one of our clients recently accepted an offer than was 5% lower than the highest offer due to non-valuation attributes the buyer brought to the table.

Here are 5 non-valuation factors our deal teams often see buyers use to successfully differentiate their offers from the others at the table.

1. Seller prefers your deal structure.

Cash at closing is desired by sellers. When reviewing offers, sellers take notice when a buyer is mindful about their tax implications in the structure of the deal.

2. You are a solid cultural fit.

A seller of a family or founder-owned business truly wants to make an emotional connection with a buyer during management visits. Business owners want to make sure their business, and ultimately their legacy, is being left in the right hands.

3. You have industry and M&A process expertise.

Buyers quickly build rapport with sellers when they demonstrate prior acquisition experience and knowledge in their industry. Most business owners have not completed a sale before and find it attractive when a buyer has already laid out due diligence and transition plans.

4. You have a strong strategic sales growth track record.

Many sellers have reached an inflection point in their growth that requires more sophisticated sales efforts and systems in order to progress. Sellers are interested in hearing from buyers who have a track record of executing on strategic plans for businesses that had similar needs to propel future growth.

5. Seller is impressed by your executive network.

Business owners are interested in learning more about the executive and board-level connections that larger buyers and investors possess. Sellers will look to buyers for assistance in filling holes in the management team in order to execute growth plans.

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Nolan & Associates’ commonly owned affiliate, Middle Market Transactions, Inc. (MMTI), is but one of a very few FINRA licensed broker dealers serving business owners in the middle market.

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