What Qualifies a Business for Mergers and Acquisitions?

At Murphy Business Atlantic, our experienced Business Brokers specialize in larger transactions. Dan Murphy, one of our Founding Partners, has over 30 years of experience in the corporate boardroom, merging and acquiring businesses with up to $70 million in annual revenue.

What qualifies a business to be an M&A transaction? There are several criteria that may qualify your business as an M&A transaction. These criteria include:

  • Your business has earnings greater than 1 million dollars. When business grows to this size they become targets for acquisition by industry players.
  • Your business is too large for an individual buyer to purchase or finance through conventional methods. Once your business is worth more than a million dollars, a single individual is less likely to have the resources to purchase it.
  • Your business is in an industry that is currently being “rolled up”. In some industries, strategic buyers that want to consolidate the marketplace will purchase even small businesses.
  • Your business is experiencing incredible growth. If you business is running out of capital because of growth, it may be an M&A target.
  • You want to grow your business and perhaps retain some equity. If that is the case, you will need M&A expertise.

Who Buys These Businesses?

1. Private Equity Groups

Private Equity Groups have raised many millions of dollars from pension funds and institutional investors for the sole purpose of investing in privately-held businesses such as yours. In addition to looking for Platform Companies that fit their published investment strategies, they are also looking for add-on acquisitions for the companies already in their portfolio. While many of the Private Equity Groups may have raised several hundred millions in capital, some have raised billions and eclipse some “Fortune 500″ companies in size.

Although many Private Equity Groups are primarily interested in purchasing 100% of companies, some also make recapitalization investments where the present owner sells only a portion of their stock and remains as top management of the company with a planned future retirement. This allows you to take some cash out of your business now and sell the balance of your ownership when you retire.

2. Corporate Buyers

Corporate Buyers (other companies) are the most likely buyer when selling a larger business in Atlantic Canada. At Murphy Business Atlantic, we know how to identify corporate buyers who may be interested in acquiring your business. We know how to make confidential inquiries to corporate buyers without disclosing your company’s identity.

Our experience leads us to believe an auction process does not maintain the confidentiality most sellers desire. It can reduce the implicit value of your company if so many buyers look at your business that it becomes over-shopped. We prefer to help even the most jaded corporate buyer discover the untouched diamond in your business. Only experienced business mergers and acquisitions experts can accomplish this in an effective manner.

Although most corporate buyers are interested only in purchasing 100% of businesses such as yours, some are interested in forming strategic alliances that may also involve an equity investment with a formula agreed to in advance which allows them to purchase 100% at a later time. Our experienced Business Brokers can help you make contact and negotiate a strategic alliance.

3. Wealthy Individuals

Another option when selling a larger business is to sell it to wealthy individuals. Many wealthy individuals band loosely together with others to form what appears similar to the organized private equity groups. These individuals bring significant management skills as well as access to capital beyond their own financial capacity. Most are interested in making investments in privately-held businesses such as yours and being involved at the board level to help the company with financing, strategy and marketing issues. They frequently have significant experience acquiring businesses. With Murphy Business Atlantic on your side, we can help you level the playing field.