November 23, 2022 at 2:27 pm #71457Kannuswamy VenguswamyParticipant
In the arena of private companies (closely-held family-owned corporates) looking to acquire other private companies in an unrelated new vertical (as a diversification strategy), how risky or advisable it would be to go about the target search by formally engaging a professional corporate M&A Advisor ? Instead, would such an acquisitive search done more informally through the existing network of suppliers & customers and referrals be more advisable and rewarding ?
The background to this specific query is based on the reservations or apprehensions of the acquiring private company to consummate a deal with a totally unknown private company, more so engaged in a different vertical and operating in another country / continent, without building the much needed acquaintance and getting-to-know the target company. On a lighter note, the question is somewhat similar to asking – should we opt for the process which is adopted in case of a ‘arranged marriage’ or the one adopted in case of a ‘love marriage’
Look forward to your comments.November 24, 2022 at 2:25 pm #71476Paolo CParticipant
My point of view is that it is always better to be introduced by someone who knows the company and the owners. As a complete stranger, it can take quite sometime to build trust which is a key component in convincing the owner to sell to you.December 20, 2022 at 12:27 pm #72581Kannuswamy VenguswamyParticipant
Thanks Paolo. I am also of the same opinion.December 27, 2022 at 5:00 pm #72739Brandon LauParticipant
My company uses multiple ways to conduct potential target search, which include:
• relationship from Board members, senior executives and investment bankers
• research effort, particularly underperforming companies in the same business/technology sector
• suppliers and vendors which we work with and establish close relationship
However, we often found the relationship deals are easier to engage and both parties are willing to share their concerns during the discussion.January 4, 2023 at 9:42 pm #73020Rachel BoyntonParticipant
I think there can be real value in using a 3rd party advisor in this case, since they can often bridge the gap between buyer and seller. As an advisor or intermediary, I find myself often translating between the two, since they might not be familiar with the industry and vocabulary. Someone in the middle can help to alleviate the tension that comes with diligence as well. You might get a more objective perspective of the target through the eyes of someone else too.January 9, 2023 at 11:16 pm #73259S Sarala MaharajParticipant
In my experience, having a third party independent consultant go “out to market” has proven the best strategy for divestments of our higher value. This is not to say internally we have not undertaken our own assessments (financial or otherwise). Having a consultant encourages transparency, helps to avoid a conflict of interest and assures shareholders that a sale is at good value. This service of course comes at a cost and we often go out to RFP to secure an advisor best suited to the type of deal.
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