Could an International Buyer Be the Right Fit for Your Company?

Middle-market business owners are just like every other business owner in at least one respect. When it’s time to sell their businesses, they want to get the best price possible. After all, it often is the most important transaction of their lives.

But what if the best offer for your firm is from an international company?

A number of years ago, 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 in the drilling industry. The owner knew most oil & gas services companies were selling for four to six times annual profits as measured by EBITDA (earnings before interest, taxes depreciation and amortization).

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 for a buyer both domestically and internationally, when the deal closed, the company sold to a foreign buyer for nine times forward earnings, or 15 times the EBITDA it had made the previous year. It was a great valuation and a win for the owner.

Expanding 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 new technology and for access to new markets. This naturally creates more demand for the product or service which generates a higher value.

Sometimes international and domestic markets are on different economic cycles. For instance, domestic market values may be down when international values are up. And even without that type of market advantage for the seller, just having more buyers at the table can be a very good thing. More competition generally means more offers, and that typically adds up to more money for the seller.

In addition, international buyers are likely to pay more if they fear a competitor is going to close the deal. An experienced investment banker can help you find these international opportunities.

The first thing to do is to change your marketing plan. Entering into an international business arrangement can be challenging, but it doesn’t have to be. The ideal way to market your company internationally is through a worldwide organization, such as Globalscope Partners, which is made up of 53 M&A advisory firms in 42 countries. Globalscope 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 your M&A advisor’s ability to communicate with buyers in culturally appropriate and effective ways. Through such an arrangement, your advisor can:

• Eliminate language barriers
• Customize marketing programs for different regions of the world
• Eliminate confusion about currency or financing arrangements
• Attract qualified, international buyers to the table
• Make sure you and the buyer are comfortable with the negotiating process
• Help ensure that you receive top dollar for your business

When you sell your business, you want to tap into the largest number of potential buyers who can offer the best price and terms for your company. It’s easier to do that if you bring international buyers into the mix.
At Allegiance Capital, we want you to know what you’re getting into when you sell your business. We view educating prospective clients as one of the most important things we do.
We like to begin our process by offering a free book called Street-Smart Moves for Selling Your Business by Joe Aberger. It’s brief, well-written, and addresses 29 topics that are critical to selling a business like yours. Be sure to Sign Up Now.
And, in the meantime, if you have questions, feel free to call me at 214.217.7757.

About the Author

Eric Kern
Senior Vice President
Phone: (214) 217-7757