Middle market business owners want to secure the maximum price for their company, and in doing so, should strongly consider international buyers.
I worked with the CEO of a successful oil & gas services company, who also held a patent on a new type of equipment used every day throughout the industry. The owner knew most oil & gas services companies were selling for 4 to 6 times annual profits (EBITDA). However, he also believed his patent added value to the company and thought his company should be worth much more than the industry standard.
While we looked both domestically and internationally, when the deal closed, the company sold to an foreign buyer for 9 times forward earnings, or 15 times the annual profit (EBIT) it had made the previous year--a great valuation and a win for the owner.
Expand Your Geographic Scope
You might be able to sell your business for a significantly higher value to an international buyer as did my client. International companies tend to pay more for technology transfer and for access to new markets for their products and vice versa. This naturally creates more demand for the product or service which equates to a higher value. There may also be a discrepancy between international and domestic markets-domestic market values may be down when international values are up. Overall however, more buyers at the table means more offers and more competition. This typically adds up to more money for the seller. The international buyer is likely to pay more if they fear a competitor is going to close the deal. They may also be the only buyer out there. An experienced investment banker can help you find these international diamonds in the rough.
The first thing to do is to change your marketing plan. Entering into an international business arrangement can be challenging, but it doesn’t need to be. The ideal way to market your company internationally is through a worldwide organization, such as Globalscope Partners, which is made up of 34 advisory firms in 25 countries. Globalscope facilitates M&A activities in the international space. The organization enables members to market companies worldwide and offers invaluable insight on how to conduct business in different parts of the world.
Working with an organization such as Globalscope Partners also enhances the ability to communicate with buyers appropriately, so that:
- Language barriers are eliminated.
- Cultural differences are recognized, so we can customize marketing programs and our selling process for different regions of the world.
- There is no confusion regarding currency or financing arrangements.
- Top, qualified, international buyers come to the table.
- Both buyer and seller are comfortable with the negotiating process.
- The seller receives top dollar for their business.
When you sell your business, you want to tap into the largest number of potential buyers possible who have the potential to offer the best pricing and terms for your company. To ensure you accomplish these objectives we recommend including international buyers in the mix.