Washington, DC

Who is going to purchase your business? There are generally three types of buyers; high net-worth individuals, companies, and private equity firms. High net-worth buyers may be looking for a company to own if they want to be their own boss or aren’t ready to retire yet. These buyers want to get out of the corporate rat race and have a desire to own a business instead of being an employee. They might feel like they can run their own business, and control their own destiny, instead of having someone else control their work hours, or the way things are done. Most of these types of buyers are going to have some funds from their savings to use for the purchase but will likely need to get financial help from a bank to purchase the business. They may or may not have experience as a business owner, but will likely have experience in the industry and know what it takes to be successful.
Companies also buy businesses in their industry to spur quicker growth. While this is who the typical business owner believes will buy their business, this is actually rarely the case for smaller businesses. Smaller businesses also rarely understand the mergers and acquisitions market and are sometimes unwilling to pay market prices. Once a business grows into the lower-middle market or middle market, businesses tend to be more understanding of M&A and acquisitive. While we love when another business buys one of our businesses, as this typically cuts down on questions and post-closing training, we have to be prepared that this may not be our buyer.
The third type of buyer is private equity. This may also include venture capital, on occasion. Typical private equity buyers are sophisticated. They have gone to the best schools and learned to buy, run, and sell business. They dive deep into due diligence and do lots of research on an industry. They are generally savvy negotiators. Since PE firms use leverage (bank loans) to juice their equity returns, PE firms need a deal to work under the confines of a bank loan. PE buyers have become a larger part of the marketplace over the past decade.
Since no one can be sure who will ultimately buy your company, we have to prepare the marketing materials to appeal to all three types of buyers. As Washington DC business brokers and from speaking with thousands of buyers over the years, we know their likes and dislikes. You will want to put your best foot forward or risk losing a solid buyer or, potentially, not get the kind of deal you want.