Ekpyrosis triples its business acquisition meetings: a private buyer case study

The challenge: finding the right companies to acquire

• databases did not deliver good results, as most companies do not publish their accounts and are not listed;
• M&A advisers and corporate finance boutiques lack transparency and are expensive;
• working alone on the project is time-consuming: finding suitable companies, gathering contact details, reaching out to them… everything was too slow.
  

Olivier Dietlin’s situation is that of many private buyers: a solid project and experience as a business leader, but no dedicated team to search for, analyse and approach targets. The buyer has to convince sellers that he is the right successor and, at the same time, convince funders that the project stands up, most often through a dedicated acquisition holding company such as Ekpyrosis. Running these two workstreams in parallel, alone and on top of one’s day-to-day activity, is what makes a business acquisition take so long for an individual.

The initial difficulty lies mainly in access to targets. Public listings and the businesses for sale listed on the market represent only a small share of the companies that could actually be sold, and every buyer is looking at them at the same time. Most owners who might sell have never published a listing: that is why 80% of our transactions are completed off-market, through access to off-market business sales based on identification and direct approach.

The third obstacle is the preparation of the buyer himself. Before approaching an owner, you need to have defined your criteria — sector, size, geographical area, profile of the existing team — and to have a framework for assessing an acquisition target across its value chain. You also need to know your financing capacity: a private buyer generally relies on an LBO structure, which finances the acquisition through leverage, and sellers are more receptive to a candidate who already knows how he will pay the price.

The solution: semantic target sourcing and direct outreach

“They sourced a large number of leads, including in sectors where I thought I already knew every player. It allowed me to discover companies that were unlisted or poorly listed in traditional tools.”

“I think that’s an excellent ratio.”

“I had excellent relationships with the sellers, which shows that the initial introduction made by Collaboration Capital worked.”

This sourcing work is part of our DEAL Diamond method, which combines artificial intelligence and analysts. AI brings to light companies that conventional databases overlook or misclassify, then our analysts check that each lead fits the buyer’s criteria before any contact is made. This double filter avoids approaching owners who are off-target and focuses efforts on the companies that genuinely match the project. The buyer approves the list before any approach.

The care taken over the first contact largely explains the rate of positive responses. An SME owner approached clumsily often closes the door for a long time; approached tactfully, by a third party who explains the project and guarantees confidentiality, he is more willing to discuss it. The script approved by the buyer also ensures that what is said matches his project and intentions exactly. Each exchange is then recorded so that the buyer has a clear history of contacts.

Once the introduction has been made, the acquisition journey is only just beginning. The value of the company has to be estimated using several business valuation methods, an offer made, and the transaction then secured through a letter of intent, due diligence and an appropriate warranty: our page on the LOI, due diligence and the warranty and indemnity (GAP) details these steps. The buyer can be supported at each of them, or only at those where he needs extra help.

Financing is the other pillar of success. As an IOBSP broker, we structure the LBO, MBO or OBO acquisition finance and present it to the banks and investors in our club of qualified funders. For a private buyer, coming to a seller with a credible financing plan is often what makes the difference against competing candidates.

For sellers, this approach also has advantages. An owner who had not yet formalised a plan to sell meets an identified, serious and already prepared buyer, without having to make his intention to sell public. For many SME owners, it is an opportunity to consider a business sale on controlled terms, or to plan ahead for a family business succession when no successor has been named.

Three lessons emerge from this project for any buyer. Define your target precisely before searching, so that every contact is relevant. Favour a direct approach to owners rather than simply monitoring listings. Prepare the financing upfront, so as to be credible from the very first discussions. Our free guides on acquisition, sale and financing cover these steps in detail.

Ekpyrosis’s experience shows that a lone buyer can access a flow of targets comparable to that of a structured acquirer, provided he relies on a method and a team. Other companies have followed a similar approach, as the Groupe Open case study on a targeted acquisition shows. To define your own target criteria and launch the search, you can contact us about an acquisition project in a first confidential conversation.