Just like anything you can think of that is bought and sold, businesses also enjoy the competition that comes from having multiple parties interested in buying the business. If a bidding situation develops, the selling price goes higher still.
Given that, it is interesting to take a look at how businesses are typically marketed and sold.
Small Businesses (Sales less than $2 million)
Small businesses are typically sold by business brokers. Brokers, in order to make a living, typically handle 7 to 10 business-for-sale listings and really don’t have the time to do much, if any, custom marketing. The marketing is usually limited to running ads on the business-for-sale web sites , and having multiple parties interested in buying (if it is going to happen) usually happens early in the process when the ads first appear. Marketing only on the web sites makes sense for many small businesses since the web sites are geared to individual buyers – which make up the majority of small business buyers.
Middle Market Businesses (Sales $2 to 50 million)
The market for mid-sized businesses gets larger as the company gets bigger. High net worth individuals can still buy, but more often other companies and private equity groups will also be potential acquirers of the business. The problem is that many companies are not actively looking to acquire, although many will jump to buy when the right opportunity is presented to them. Thus the key to getting the most attractive bids for middle market businesses is to broadly market the company to a large number of individual buyers, potential corporate suitors and private equity groups. In other words, the secret to getting a business sold for the maximum price is marketing. The key is not primarily industry contacts, not astute financial analysis, and not from solely using business-for-sale web listings, but good old fashioned marketing like mailings, telephone calls as well as print and web ads.
Middle market businesses are typically sold by M&A firms. In order to attract the highest price by having the greatest number of bids, look for a firm that focuses on marketing. I’m biased of course, but The Woodbridge Group does the best job of marketing that I’ve seen, and plans the marketing campaigns to obtain simultaneous indications of interest and follow on bids.
Large Businesses (Greater than $50 million in revenue)
Larger businesses can also benefit from multiple bids, as we all witness occasionally in media. However broad based marketing is not as important for larger companies because there is a limited universe of buyers. If Yahoo! really wanted to sell, there is only a limited number of companies that could buy it, and a good investment bank in that industry would probably know all of them. Thus larger companies use investment banks to sell their businesses, in large part because the bankers have contacts in the industry and can more easily approach the prospective buyers. The goal, of course, is still to get multiple party interest and ultimately multiple bids.