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If you’ve built or led a successful business, it isn’t a question of when someone will approach you about buying the business, it’s when. So, when the time comes, it is important to understand the different strategies and approaches. There are many ways to run a transaction but to keep things simple we will cover three of the most common (one-off, targeted, and broad processes) and give you some real-world scenarios on the benefits of each.

Broad Competitive Process: No Stone Unturned

A broad competitive process typically aims to ensure the stakeholders find their optimal suitor by ensuring no stone is left unturned. To that extent, in such a process the list of potential investors/buyers that you market the company to will be large, sometimes exceeding 300 parties, and exhaustive including both public and privately held companies, private equity groups, family offices, and in most cases strategic competitors.

This broad approach can help to maximize the valuation of the business, produce offers with various transaction structures, and ensure you find the best partner and cultural fit,  especially if you are looking to stay on with the business.

Broad Process Case Study

In a recent transaction with Company A, a client in the industrial sector, the client came to us with a couple of verbal offers in the range of $220m. This unsolicited interest gave them reason to believe that running a larger process and contacting the broader market could increase that value substantially by creating competition. Throughout the process, we reached out to over 200 Potential Buyers, including both strategic players and financial sponsors nationally.

This extensive outreach created a highly competitive environment, which was instrumental in driving up the bidding intensity. As a result of HPC’s process, one of the initial bidders submitted an offer at $300m, a $80M increase from the original offer. The ultimate buyer was a new party that came in at $365m, a $145M increase over the initial offers. We successfully increased the transaction value of the company, achieving a final sale price that far exceeded our client’s expectations and initial market estimates

This approach, while potentially lucrative, requires significant resources and time, so while the benefit can be great at times there are many factors to take into account.

Targeted Process: Precision and Strategic Fit

A more targeted process offers the benefit of precision and alignment with carefully selected potential buyers. The criteria used to compile this list can vary greatly: strategic fit, culture, a particular transaction structure or desire to work with the potential acquirers post-transaction.

Targeted Process Case Study

A prime example is our work with Company B, a medical practice group. This client was also approached with an unsolicited offer, around $20m, that several partners voted to accept, but ultimately decided that they should expand the offering. This particular client operated in a very niche section of the market that effectively reduced the number of viable acquirers and thus, adding an extensive list would have only increased the timeline to accomplish the goal.

After engaging HPC, we identified a select group of competitors and strategic partners whose objectives aligned closely with Company B’s long-term strategic goals and desired outcomes for the transaction. By engaging this smaller group in a targeted bidding process, we not only fostered a competitive environment in a controlled setting but were able to do so swiftly and efficiently with acquirers who were hand-picked and had a history of transacting in a structure that was acceptable fit the client’s desires. The result was a purchase price nearly triple the initial offer, significantly enhancing shareholder value while ensuring a strategic fit that promised smoother post-transaction integration.

One-off processes

In both of the cases presented above the clients had been approached by one or more potential buyers, and the outcome after running a process was substantially greater than if they had proceeded with the initial offer. While there are exceptions to every rule, this almost always reigns true.

M&A transactions aside, if you were looking to purchase something it would be in your best interest to speak with the seller in a manner that reduces demand so that you could get the best possible deal. In the same way, it is almost always more beneficial to attempt to acquire a company without competition so you can control the bidding environment and get the best possible deal.

Many times we are asked to first assist with direct negotiation with a buyer at the table, but should that slip, we quickly look to build the process from there to best fit the goals of the client with respect to a transaction.

Choosing The Best Approach for Your Needs

The decision to opt for a direct negotiation with a buyer at the table or a broad competitive process or something in between is one unique to your situation and there is certainly no one-size-fits-all answer. Many times the decision is influenced by factors such as the company’s strategic opportunities, optimal structure, company culture, industry landscape, and specific priorities. For many of these clients, the answers to these questions are unclear at first.

To the extent you are curious about what method is best for your company, we would be happy to discuss how these strategies can be tailored to fit your company’s unique situation and assist you in achieving your strategic objectives efficiently.


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