6 Acquirers to Include on Every Buyer List

For sell-side advisors, building the best buyer list possible can make or break your client’s chances of M&A success.

Don’t neglect these types of buyers when building your next list.

1. Financial Buyers

Your client may have heard that strategic buyers pay more than financial acquirers — but don’t let them convince you to eschew PE, family offices, or other financial buyers completely.

Financial sponsors are expert dealmakers and many run dozens of processes each year. They know what the standard procedure is and will have well-oiled internal machines in place to make sure the deal runs smoothly and efficiently. Even if your client ends up moving forward with a strategic buyer, a financial acquirer will ensure deal discipline as the process gets off the ground.

In addition, financial buyers are more likely to come to the table — boosting deal certainty in the case of lower interest than anticipated.

2. Direct Competitors

Direct competitors are no-brainer additions to the list. The most enticing synergies will come from companies competing in the same market as your client. The greater the need for an asset, the more a buyer will be willing to pay. The greater the synergies involved in a potential merger, the more money they’ll be able to justify handing over.

3. Hybrid Strategics

These are financial buyers who already own a related business and are looking for add-ons. These buyers more closely resemble strategics — they’ll be highly motivated to buy, on the lookout for synergies, and usually able to pay more than a financial buyer without an affiliation in the space. As an experienced financial buyer, they’ll also run a tight process and will be highly focused on sussing out areas of overlap and potential value.

4. Specialist Financial Buyers

If you’re building a buyer list for a sector you work in frequently, you’ll almost certainly include specialist sponsors on your list. If you’re operating in a sector you work in less often, it’s worth seeking these folks out. They tend to hire people with experience in the industry and will have a more nuanced understanding of the market and the opportunities that your client’s business presents.

Even better if you can find buyers with unused capabilities in your client’s sector — e.g., a firm that specializes in a few areas but doesn’t currently have an investment in yours. This firm may have a specialist on their team who currently isn’t using his or her expertise, and is looking for the right opportunity in the space. This specialist will have a high level of knowledge, can serve as an in-house advocate for your deal, and will have a natural inclination toward filling his or her unused capacity.

5. International Buyers

International partners can bring a new perspective to the table, and may have different interests in the company than domestic buyers. Network with fellow bankers and deal professionals to expand your relationships across borders; the best way to find far-flung potential buyers is to develop a reciprocal relationship and leverage local knowledge when building out your list.

6. Long Shots

The best buyer isn’t always obvious. Even if 75% of the time, a company is sold to the most likely acquirer, that means that a full quarter of businesses go to someone unexpected. At the end of the day, selling a company is a numbers game — and the more qualified buyers you put on the list, the better the chances of success.