Cons of doing a deal with strategic buyers:
1. Can be unsophisticated dealmakers and may not know what “market” is within your industry. Often strategic buyers have “their way of doing things,” and this isn’t necessarily how deals generally get done in LBM.
2. May not have a dedicated deal team, which means the demands of their existing business can get in the way of pursuing a deal with you.
3. If they are a publicly traded company, swings in stock price/performance quarter-to-quarter can derail a deal very quickly—no matter how far down the road you are with them. It happens.
You’ll meet strategic buyers in many ways: Roundtables, conferences, competing with them, or via your advisor’s industry contacts. Often, this is how conversations start about potential interest in your business. Strategic buyers may have full time M&A people who look at/for deals or sometimes someone like the President, CEO or division manager will be heading up the effort.
Watch for Part II of this series in the October issue of LBM Journal.