Alert to US Business Owners
Can foreign buyers justify paying higher acquisition prices today? If so … What type of businesses are foreign buyers searching for today? Certainly, there are interested buyers in most industries. However, with the recent restructuring of international trade, the drive to acquire US manufacturing businesses has certainly increased! So, it is reasonable for a business owner to ask: What kind of manufacturing companies are going to appeal now to foreign buyers … and why should I care?
Foreign corporate buyers will be acting to advance their business interests and their larger strategic goals. These companies are probably going to be seeking smaller, less-known firms that will enhance their strategic initiatives …and reduce operating costs in the US market. Such business purchases are going to be motivated by:
- Rounding out and solidifying a growing global market position
- Adding a domestic US plant quickly with immediate sales contribution
- Gaining access to new technology, resources, and processes
- Adding an additional strong, domestic brand name to their portfolio
In general, foreign buyers' motivation can make them willing to pay a premium price for a company in the right geographical location with attractive attributes that meet their objectives. These prices paid maybe significantly more than a US based buyer would pay!
It should be kept in mind that foreign corporate acquirers have been active in the US for many decades. Depending on the period of time, foreign buyers accounted for 10-20% of the total cross-border US transactions. About 50% of these deals were valued at less than $25 million. So, clearly there has been and likely will continue to be an expanding appetite for smaller US companies. A growing portion of these acquisitions is expected to be in the manufacturing sector.
With the consequential changes in the market, it is likely that foreign acquirers will account for more than 20% of all US deals in the next few years. And … that a growing portion of those target businesses will be small to mid-sized manufacturing companies.
Foreign buyers are willing, at times, to pay higher prices for US based companies because they take the long view. They assess the value of the takeover targets differently than US buyers do. Foreign buyers are factoring in recent cost variances and what the new operation can do for them over the long run. Ultimately, elevated prices will be driven by the buyers' view of the contribution to their established marketing plans and financial objectives.
To get in front of this growing wave of foreign buyers, manufacturing company owners and other business owners should begin now to prepare for a rewarding change in ownership. A great buyer may arrive at their doorsteps sooner than anticipated. Consequently, it will pay huge benefits to be positioned to effectively consider such a unique opportunity to sell to an attractive acquirer at a premium price.
Here are the actions to take to be ready for an exceptional transaction:
- Read the best-selling book: When is the Right Time to Sell My Business?
- Assess your business and take the preparatory actions outlined.
- Identify and engage an experienced investment banker.
- Follow the advice of your banker to fully prepare the business (and yourself) for an exciting and challenging transaction process.
- Negotiate with confidence to reach your business and personal goals.
With the knowledge you will gain from the recommended book, you and your advisors can craft a plan to put your company in front of both US strategic buyers and well-funded foreign buyers. With solid preparation and a first-class marketing effort, you should be able to complete a sale at your price on your terms … in the highly attractive market now developing!
[You can start your search for a middle market broker at the M & A Source.]