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No matter the state of the economy, buyers will always pursue what they perceive as a quality seller. Obviously, there are a plethora of buyer types, such as those that:

  1. Never vary from their stated mission or platforms.
  2. Gravitate to the industry “Flavor of the month.”
  3. Combine ingrained platforms with flexibility to expand the portfolio or create new platforms.
  4. Pursue any deal that meets their location, revenue, and EBITDA targets.
  5. Focus on minority purchases.
  6. Emphasize investments of debt versus equity, or a combination of each.
  7. Only consider part cash and earnouts.

With a multitude buyer types, how is a seller expected to find the best buyer? Simple answer: hire the investment bank that has the buyer relationships and will negotiate the deal terms that dovetail into an optimal outcome.

Key issues for sellers to be considered a quality candidate are the following:

  1. Depth and experience of management team and its willingness to remain with the company post-transaction.
  2. Consistent, accurate, and understandable financial statements. The quality of earnings (Q of E) analysis by the buyer reflects the same.
  3. Lack of significant customer concentration and independence from single key-employee relationships.
  4. Intellectual property that is easily understood and provides real marketplace advantages vis-à-vis competitors.
  5. Adjusted EBITDA calculation is detailed and supportable.
  6. Any potential negatives, such as profit margin erosion, is identified and explained at initial stages of the selling process.
  7. Growth prospects are justified and profitable.
  8. Effective procedures and systems allow for dashboard overview and analytics.
  9. Profit margins for each product or service are well-known and above industry standards.

Quality sellers continually focus on improving the above value drivers.