Listing a Middle Market Business For Sale

Selling a middle market company is a different type of transaction that requires a professional business intermediary that is familiar with transacting such deals. 

However, listing a business for sale in the ‘middle market’ space can be tricky in that there are not many professional intermediaries in the Toronto, Ontario region that are equipped to handle deals valued at over $1 million and under $5 million in size.  There certainly are many mergers & acquisitions firms that handle the higher level transactions but there are relatively few M&A professionals in Ontario, Canada that deal in under the $5 million value level.

That being said, if you own a business that falls into that range then there are a few options for you to explore.  Some business owners try selling their business themselves but this is not an advisable approach as most people are unfamiliar with how to sell a business effectively.  If you insist, you can attempt this by contacting your personal and professional network or even approaching some competitors you think might are interested in acquiring your company.  You may quickly realize, however, that you do require professional assistance and turn to a business broker to assist you.

A ‘main street’ business broker is the professional that can assist you in selling your company that is in the lower ‘middle market’ range.  They will typically try to find a suitor for your company in a number of different ways.  At deals valued over $1 million, he or she will usually need to take a proactive approach and vigorously search for your buyer.  This type of business sale can become quite involved and time consuming.  In fact, the total time involved to sell a mid sized company can be up to year or more.

What types of buyers will the business broker search for?
The short answer is – it depends.  Your business broker may determine that the type of mid-market company you own is best suited for a ‘financial buyer’ or a ‘strategic buyer’.

So, you may be wondering what the difference is between a strategic buyer and a financial buyer?

Financial Buyers
A financial buyer is a buyer (or investor) that is interested in acquiring a stream of earnings.  They are quite interested in the growth prospects of the industry, the stability of cash flows and if the business will make a good overall return on investment.  Financial buyers can be wealthy individuals or private equity groups looking to put their money into a company that will deliver them the yield they require.  They may not be interested in being owner/operators and may look to install professional management into the company to operate it on their behalf.

Strategic Buyers
A strategic buyer differs from a financial one in that this type of acquirer may be a competitor or a company with a complimentary product or service offering.  A strategic buyer may see opportunities (or synergies) in acquiring a certain type of business.  These opportunities may include things like cost savings, access to new markets or geographic and operational diversification.

A strategic buyer may have more interest in a company if they can benefit from the acquisition by more than just receiving the existing stream of income.  For this reason, a strategic acquirer may place a premium price on a target company versus a financial buyer since they have potentially more to gain from the acquisition.

Selling your middle market business is certainly a process that can take several months or more to accomplish. There are relatively few professionals in the Toronto area that focus on selling businesses valued between $1 to 5 million.  If you do own such a company, please contact a competent intermediary to explain the steps involved to you.