Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

September 9, 2022

Motivated Investors – How To Find Them

By Karin Neumann

Closing the deal is a significant challenge business owners face once they’ve made the decision to sell their business. Some business owners still hope somebody will walk through their door and make an offer they cannot refuse. While in some instances, inflated purchase prices might exist amongst public companies or with strategic acquisitions, but rarely will a buyer overpay for a business. In order to get a deal done, it will take a seller who is committed to sell and a buyer who is truly motivated to make a purchase.

So how do you find a truly motivated investor?

For a business owner, it is advisable to rely on a professional M&A advisor to identify buyers to support the owner in the transfer of the business as business owners have usually little experience and time to devote to find the right buyer. Prior to identifying and qualifying buyers, the asking price for the business has to be established through an independent, 3rd party business valuation, after which the advisor will prepare the business for sale.

Once the business has been posted on major business-for-sale websites in a confidential fashion, never releasing the company name or location, the M&A advisor will receive email or phone inquiries from potential buyers.

Another way to find potential investors is by extracting buyers who had shown interest in a similar business in the past out of a proprietary database or by identifying competitors and then creating USPS and email campaigns and reach out to see if there is interest in an acquisition.

How do you find out if any of these buyers who respond to the advertisements are truly interested?

The first step to differentiate between buyers on a fishing expedition or competitors trying to gain knowledge about their peers and a truly interested party, is to rigorously pre-qualify any potential buyer. Buyer pre-qualification documents should include:

  • A Non-Disclosure Agreement (protecting the seller’s confidential information)
  • An Investor Profile & Management Experience (important to get bank financing in place)
  • A Financial/Bank Statement (confirmation that sufficient funds are available for the acquisition)

Buyers who refuse to complete the pre-qualification documents are usually not serious buyers or don’t have the funds in place. There is no reason to give them access to confidential information about the business. Any investor who is seriously looking to buy a business should expect to be pre-qualified and shouldn’t have an issue to provide the requested information.

“Over the years we have seen a steady increase of buy-side inquiries, “says Karin Neumann, Managing Director in the Buy-side Department of A Neumann & Associates, a leading Mergers & Acquisitions and business brokerage advisory firm, headquartered in New Jersey, “however, less than 50% of inquirers respond after sending the initial inquiry and of the remaining 50% only half are willing to provide sufficient documentation to get pre-qualified. The fastest way to find highly motivated buyers is to reach out to our pool of more than 1,000 pre-qualified buyers in our proprietary database.”

Only after a successful pre-qualification should the Confidential Memorandum – disclosing company name and location – and 3rd party independent valuation be sent to the buyer. Once the buyer has reviewed the Confidential Memorandum and decided that there is further interest in the business, he will ask for a buyer/seller introduction.

The M&A advisor should first schedule an initial call to find out if the buyer seems to be a good fit to avoid time spent with unnecessary buyer/seller introductions. If there is continued interest, the advisor will schedule a call/meeting with the business owner to discuss the operation; if requested, the advisor will provide additional financial information and set up a site visit for the investor. Subsequently, if the buyer is ready to move forward with the acquisition, he will issue an offer to purchase or letter of intent. True motivation is shown on the buyer’s side by sending an escrow check together with the offer to purchase.

In sum, identifying truly motivated buyers will help to avoid wasting time for the seller, risking a breach of confidentiality and to get to a successful closing!

About A Neumann & Associates, LLC

A Neumann & Associates, LLC is a professional mergers & acquisitions and business brokerage firm having assisted business owners and buyers in the business valuation and business transfer process through its affiliations for the past 30 years. With an A+ Better Business Bureau rating, the company has senior trusted professionals with a deep knowledge based in multiple field offices along the East Coast and has performed hundreds of business valuations in its history. The firm’s competitive transaction fees are based on successfully completing transactions. For more information, please contact A Neumann & Associates at 732-872-6777 or info@neumannassociates.com

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James Belanger, Business Owner

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Andrew G., Investor

“We worked with Neumann & Associates to investigate the purchase of a research company in 2010 and found Achim to be capable, forthright and realistic. His depth of experience enabled us to fully understand our options, offering creative options that might enable the acquisition. While we didn’t acquire that particular company at that time, we know exactly who to call whenever we’re looking to buy or sell a business.”

Daniel Coates, Buyer

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William Klemens, Buyer

“I utilized A. Neumann & Associates to assist in an M&A process. They are VERY thorough in using their time-tested process to calculate the value of investment opportunities, a process which provided a very detailed explanation for the value of the potential opportunity. Additionally, they also went above and beyond to extend other services including connecting with others who specialize in your industry and can assist with necessary steps including legal and accounting. Highly recommended!”

Edward Lane , Business Owner

“I recently contacted A. Neumann and Associates about getting a valuation of my business done. I spoke with Achim, who explained the process in detail. He had his colleague Gary come to my office in order to get a clear understanding of my business, and what I was hoping to accomplish. His patience in answering all my questions and his knowledge of the proper way to market my business gave me great confidence that this is the firm I will be using when the time comes for me to sell my business for max value. They gave me great insight into the steps I need to take now to get the best deal in the future. I highly recommend this firm to anybody who wants to sell now or down the road. They not only know their stuff, their actually just real nice guys.”

Robert Kardane, Business Owner
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