Many business owners fall prey to the common bias that partnering with an industry-specific M&A firm is the superior choice when selling their business. Too often business owners assume there are more benefits from working with a firm that has the same extensive knowledge of their industry and connections with their top competitors as they do. However, this assumption is easily challenged with the argument that it is better when the business owner is the expert in their industry and the M&A firm is industry-agnostic and an expert in selling businesses across various industries.
While an industry-specific firm may have connections that can get them in touch with every industry player quickly, it does not necessarily maximize the value of a business sale. An industry-agnostic firm knows that optimal outcomes are the result of combining the contacts that every business owner has within their existing industry relationships in addition to the potential buyers that a seller would never consider outside their industry or geography.
If you are considering selling your business and want to experience a truly Extraordinary Exit, continue reading this article to learn how an industry-agnostic M&A firm can help you receive higher offers from potential buyers.
Table of Contents
Buyers Who Want To Get Into Your Industry Can Be More Competitive
- See a theoretical example of a popular tech company that purchased a business outside of its industry
Offers Often Will Go Above Industry Expectations for Valuation
- Industry-specific M&A firms tend to follow a predetermined range for valuing a business
- You can drive up valuation by leveraging an outsider’s willingness to surpass your industry’s norms
- View an example of how STS helped a client get a buyer to pay over 2X their original offer
Selecting an Expert in Selling a Diverse Range of Companies is Logical
- It is wise to partner with a firm that is an expert in M&A advisory
You Can Help Prevent Interpersonal Conflicts Within Your Industry
- Industry-agnostic M&A helps maintain clean relationships with your contacts for the future
Industry-Agnostic M&A is the Clear Choice
- Get an industry-agnostic firm if you want to go beyond industry valuations
Buyers Who Want to Get Into Your Industry Can Be More Competitive
An industry-agnostic M&A firm has the advantage of knowing people and companies outside of your industry. This enables them to broaden the potential buyer pool as they can find buyers who may be looking to enter your industry through a strategic acquisition.
A theoretical example of this could be Amazon in the days before Prime Video existed. If the owner of a film production company was selling their business at that time, they probably would not have considered reaching out to Amazon. However, an industry agnostic firm with deep insight into a broad cross range of industries would have the potential to uncover an unlikely acquirer like Amazon.
By reaching out beyond the usual suspects, an industry-agnostic firm is better positioned to create a more diversified and potentially robust soft auction atmosphere that can lead to offers that may exceed industry norms, which ultimately maximizes the value of their business sale.
Offers Often Will Go Above Industry Expectations for Valuation
Industry specific M&A firms typically look at your business through their traditional lens and apply their knowledge of how they can position it to their “regular” industry buyers. The instinct of such firms is to set reasonable expectations with the business seller while protecting the interests of its buyer contacts. They tend to take a softer approach and will refrain from being too pushy when negotiating because they need to avoid causing friction within their established buyer pool.
Industry-specific M&A firms also tend to have a predetermined range for valuing a business based on the other business sales that have exited in the industry. Unfortunately, the process of working within industry norms can set traditionally defined limits on the potential value of a seller’s business.
In contrast, an industry-agnostic firm is not bound by these constraints and can take your business to the marketplace without worrying about ruining their industry relationships and have the freedom to explore more lucrative opportunities for your business sale. Industry-agnostic firms must also take the time to deeply understand the business of a client at the start of the M&A process, versus quickly relying on their past industry sales or financials to determine valuation. Through the deep discovery phase, an industry agnostic firm can often uncover hidden strategic value drivers that can create tremendous valuation upside.
Exploring within and beyond your industry with an industry-agnostic M&A firm allows you to connect with buyers who may value your business for different reasons in comparison to an industry associate or competitor who thinks they can optimize your business’s valuation. Buyers outside of your industry are the ones who give offers based on their own norms and strategic intentions. By leveraging an outsider’s willingness to potentially surpass your industry’s norms, you can drive up valuation through a soft auction process that inevitably makes it possible for you to exceed industry expectations.
At STS, for example, our team helped a client with a sign manufacturing company uncover the true value of its business to prove it was worth higher than expected valuation. A bidding war between strategic buyers began and the successful bidder, who was one of the initial parties to approach the client for purchase, ended up paying more than double what they had originally offered.
Selecting an Expert in Selling a Diverse Range of Companies is Logical
It is important to remember that an industry-agnostic M&A firm fundamentally focuses on selling the value that your company will bring to potential buyers. Instead of limiting yourself to a narrow industry-specific perspective, you can partner with a firm that is an expert in the “company selling industry.”
Selecting an industry-agnostic firm allows you to gain access to professionals who have broader knowledge and expertise in selling all types of companies to all types of buyers. They can apply learnings and best practices from outside your industry, which can lead to better results for your business sale.
You Can Help Prevent Interpersonal Conflicts Within Your Industry
If you aspire to serve on a board of directors or to become a thought leader within your industry after selling your business, maintaining clean relationships with your industry contacts is essential. By partnering with an industry-agnostic M&A firm, you can have an unbiased third-party partner that will act on your behalf and will firmly push on your industry contacts during difficult negotiations. This approach helps the business owner keep their relations clean and prevents interpersonal conflicts that might negate future industry participation.
Industry-Agnostic M&A is the Clear Choice
Why limit the value of your company by working with an industry-specific M&A firm? STS Managing Director Andrew Barrett said that many business owners unknowingly confine themselves by prioritizing knowledge and contacts within their industry. He advises that you can often be better off choosing an industry agnostic M&A firm that has a track record of delivering business sales that go beyond industry valuations.
“To get ‘outside the box’ offers, you need to apply ‘outside the box’ experiences, best practices, and knowledge to the selling process. An industry-agnostic firm like STS can deliver these components to you as a business owner, regardless of your industry and will manage the process to your advantage,” said Barrett.
When you partner with an industry-agnostic M&A firm like STS, you will receive exposure to more lucrative opportunities that maximize the value of your business sale. STS boasts a global network and team of managing directors from a diverse range of backgrounds who can identify buyers outside industry norms and adjacent verticals, which has allowed us to successfully guide clients from a wide range of industries through the selling process.
If you are a founder who is interested in learning more about business exit best practices, please visit our Insights & Press page to view our other thought leadership articles inspired by our team of M&A experts.
