Tips For Selling To A Buy And Build Platform

Francesca Messina, from Stevens & Bolton LLP, wrote a guest article. She talked about the buy and build model. Messina is a Buy and Build specialist. She gave advice for selling your business.

When businesses want to grow and build value, they use "buy and build" strategies in M&A. This strategy helps businesses consolidate their market position. They use a platform to keep buying small companies or businesses in high-growth sectors with highly fragmented markets.

Companies use two strategies to increase their value: acquiring other companies for long-term growth or aiming for a targeted exit horizon in the medium term. By combining, the new entity can attract higher deal multiples and create efficiencies that reduce costs.

Buying and building is a popular growth strategy in many areas. Independent business owners who want to sell should know about this. They might have a chance to sell to someone who has bought before.

What Creates A Loyal Customer?

People who have done M&A transactions before are repeat acquirers. They are good at it. They like doing lots of deals quickly.

The process for acquisitions is often the same - find a target, do research, make an agreement, and merge the businesses. They use normal paperwork that has changed over time and addresses common risks. This paperwork is used to have sellers promise and protect against problems.

"Get Fresh News Directly To Your Email"

Receive the top business news in your inbox weekly. Our newsletter is known as the most influential in Business. Join our satisfied readers.

If you give us your details, that means you say yes to us keeping and using your personal information like we say in the privacy statement.

Thank You For Joining Us!

You will get the Business Leader weekly Newsletter now.

When buying a business, important areas like finance, tax and legal will be checked carefully. This is known as due diligence. The process can be thorough and detailed, or it can be quicker in certain areas. This depends on the buyer’s experience in the industry and how much risk they're willing to take. Buyers usually ask sellers to use a reliable data room provider, or the buyer’s own data room, to keep everything organized. This makes sure the process goes smoothly.

What's Involved In The Process?

When someone wants to buy a company, they usually decide how much they'll pay based on things like earnings and how valuable the company is. They also look at how much better the company will be once it's combined with their own. Making sure the numbers work is really important. The people selling the company should make sure they have good information about how the company is doing financially.

When buying a business, buyers will check everything. This includes share capital, contracts, property, IT, patents, and workers. The seller should make sure that all the important info is easy to find. This helps the due diligence happen faster. If there are issues, they will be discovered sooner. Depending on the type of business, they may also need to show how environmentally friendly they are.

Most repeat acquirers use completion accounts to determine the purchase price. The base price can be adjusted against a debt-free and cash-free normalised working capital adjustment. The company should decrease its debt and know its average normalised working capital position over a year. The business may also have extra cash, and the seller should decide how to include or take out that cash.

The seller should know if they will have a job after the sale. The acquirer may have planned this already. Some models don't need the seller to have a job. This can be good for sellers who want to leave or retire.

Francesca Messina works as a Managing Associate at Stevens & Bolton LLP.

In the future, a seller or their management team might have a role in making sure the new business is handed over smoothly. They could also be more involved in running the business or helping it grow through new acquisitions. If they stay on, they could benefit from any increase in the business's value.

Sellers who want to sell to a buy-and-build buyer need legal advice. Get help from an M&A advisor who knows this kind of deal. It's important for keeping up with requirements and having a smooth process.