The best buyers in many cases are the players who are in an adjacent business space.  They may be companies which serve the same customer base, but with very different products.  They may be companies who have similar products, but have focused to date on a very different customer clientele – and who thus benefit from entrance to a new customer group.

Digging for the Best Buyer

We sold a general contractor which provided internal building and equipment design and build-out to material handling customers, like major warehousers and delivery services companies. Our client bid virtually every project each year (no “automatic” recurring business) and they were dependent upon major capital projects for utility of their services – both of which tended to reduce pricing in the minds of most buyers.  However, our client had a very major project just under contract with an extremely desirable customer – Federal Express.  The company was about $30 million in sales, and was profitable (pretax) in the high teens as a percentage of sales.  The new Federal Express contract was for $60 million of work, to be done over a several year time-frame.  We had about 25 offers for this seller, all at the $30-$35 million price point.

Fortunately, we were tenacious enough to keep looking for more and better buyers.  At last we got some background information on what else Federal Express bought extensively as they built new facilities.  For example, we learned that they spent vast amounts on sortation equipment, and on conveyor belting for use in these facilities.  We targeted those slightly different types of manufacturers, who we hoped might get excited about the access to Federal Express.  In one week, we got 3 offers in excess of $50 million.  We closed that deal about 2 months later for $67 million – all cash!  (The premium buyers were found!)