As a proactive business buyer, whether a one-time buyer or someone who acquires companies on an ongoing basis, you must define and pursue various creative means to locate
unique companies that potentially offer you extraordinary acquisition potential, whether they’re “officially” for sale or not.
There is a proven adage in the sales profession that directly relates to business buyers pursuing quality companies to buy, “All the good salespeople are employed! The fact of the matter is, the best acquisition candidates are officially NOT for sale. It is not that they cannot be bought; it is just that the business owners have not made a conscious decision or reached a compelling level of justification to sell, nor have they applied any company resources to put their business on the market. Again, as in selling, sometimes all you have to do is ask!
Should I Look for a “Deal” or an “Opportunity”?
Most seasoned business buyers will tell you that they are not always looking for “a deal” in a business acquisition, but to purchase a company for reasonable purchase terms that offers a consistent, high return on investment, with little or no buyer competition (Notice that the term, “purchase terms” was used here, not “purchase price”.) To a professional business buyer, purchase price is important, but more often than not, the terms and conditions of a business purchase are most significant.
Astute business buyers focus on leveraging their investment dollars first and foremost, seeking to acquire controlling interest in a viable company for the least amount of their own money. Business purchase terms typically make or break the deal.
Understanding that the best acquisition opportunities are among companies not officially for sale, knowing that finding a business to buy that has solid return on investment potential and can potentially be bought with favorable purchase terms makes the most sense to a business buyer, it is now prudent to focus on developing a unique means to find like companies to buy.
“Product Conversions” = Great Acquisition Candidates
Business buyers should take a magnified look at how manufactured product improvements can and will equate to definition of extraordinary acquisition candidates. Products and services advance and improve as new technology is applied to them. Companies applying new technologies represent outstanding acquisition opportunities.
The focus here will be on the systematic definition of applications of new technologies for only manufactured products. However, understand that services, be they consumer or commercial oriented, are directly, positively, affected by advancement and improvement of manufactured products used in the service provided.
Manufactured products can be improved in two fundamental ways, with product content and/or with manufacturing processes. To clearly understand how this can lead to finding acquisition candidates, a business buyer needs to take a closer look at these product improvement fundamentals:
Fundamental Manufactured Product CONTENT Advancements
Product Application Improvements:
Function, speed, durability, taste, smell, simplicity, strength, noise level
Product Sensual Improvements:
Finish, color, clarity, texture, seamlessness, design, packaging Product Ease of Use Improvements: Multi-uses, storage, temperature range, safety, ease of transportation
Companies that are on the cutting edge of converting their products with advances in product content and related design improvements, such as: metals to polymers, polymers to composites, and organics to synthetics represent outstanding acquisition candidates.
Fundamental Manufactured Product PROCESS Advancements:
- Product manufacturing cost reductions
- Product quality control improvements
- Product assembly simplicity
- Product packaging improvements and advantages
- Product material waste reduction
Companies that apply the latest advancements in manufacturing processes, making new products that exemplify state-of-the-art “product conversions ”by adding product value for the same cost or significantly reducing manufacturing costs represent extraordinary acquisition candidates.
A business buyer should clearly understand the evolution and status of a product conversion in a macro market trend perspective and where or how a potential acquisition candidate obtained the technology before pursuing the company. If and how the company protects the technology is also paramount to their future growth potential and perceived enterprise value.
Additional Opportunities May Not Be Obvious, But They’re There!
Once a new product conversion is discovered or introduced to the targeted market there can be extraordinary, synergistic business opportunities for an existing business owner or potential business buyer if they immediately apply and protect these same product material or manufacturing process advancements to their existing or planned product offerings. This is especially true for products in different industries and in other geographic markets.
What you have just read is potentially a major “enlightenment” if you are a strategic business buyer. Looking at companies to purchase from a product conversion prospective can differentiate you or your firm from most other business buyers.
Being the “first” business buyer to see the potential of a product conversion at a specific acquisition candidate can potentially mean you are the ONLY pursuer of that company, effectively, uniquely, positioning you or your firm to acquire an outstanding company with excellent growth and ROI potential with little or no purchase competition.