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Why Single Industry Focused M&A Firms May Not Be Your Best Option

By Generational Equity

Business Choices

One of the common issues raised by business owners we meet with is this: “Why should I hire Generational Equity to represent my company rather than my cousin Larry who specializes in selling businesses in my industry?”

Our reply is always the same: Use your cousin Larry if you want him to approach the same list of buyers that he does with every client he works with. Hire us if you want us to access our proprietary buyer database of more than 34,000, companies across all industries that may be interested in your business.

This question is based on an erroneous belief that most business owners suffer from. They assume that the only buyer for their business will be another company in the same industry or, in some cases, their direct competitor across the street.

Now, in the end, your competitor may be your optimal buyer. However, if you start with that assumption, you will be eliminating the possibility that other companies in completely unrelated industries may find your business attractive.

Here is an important point regarding sourcing buyers from BCG’s 2017 M&A report:

Approximately 70% of all tech deals in 2016—9 percentage points more than in 2012—involved buyers from outside the tech sector.

OK, some of you will say, “But I am not in the tech sector. My business is brick and mortar and not sexy at all.” That may be true from your perspective, but you need to think like a buyer. Buyers look for intangible assets, items not on your balance sheet but features that when combined with their own create the proverbial 2+2 = 8 scenario.

The trend in cross-industry transactions was confirmed by Bloomberg recently:

One of 2017's big deal trends was the blurring of industry lines. Retailers are buying software and online outposts, wireless providers are looking to own content, and Amazon.com Inc., the king of e-commerce, scooped up a brick-and-mortar food retailer, Whole Foods Market.

For further proof, here is a partial list of cross-industry transactions in the news recently, according to Bloomberg:

Try Something New

U.S. companies are increasingly making acquisitions outside their wheelhouses. Here are some examples from 2017:

A snapshot of cross-industry M&A transactions completed in 2017Source: Bloomberg

The list above provides solid evidence of the popularity of cross-industry investing and some of them are quite compelling. For example, Whirlpool acquiring a personalized recipe company? Williams-Sonoma and 3-D imaging? Delphi and a self-driving startup?

Each of these was a strategic decision to invest in an industry that is complementary to the primary business of the acquiring firm. But you can bet that the dealmakers involved played a key role in using their cross-industry experience to find the optimal synergistic buyer for their clients.

The Bloomberg article also makes a really good point about future deal-making:

Convergence among industries continues to be a running theme for both large and small transactions. That means analysts and bankers who specialize in once-distinct areas of focus may need to bone up on other sectors.

Choose an M&A firm that gives you options

This point above brings us back to the answer to the original question: The strength of Generational Equity is that we focus our attention on doing deals across industries every day. No need for our professionals to “bone up on other sectors” – we have been doing so for years!

Having access to a diverse group of tens of thousands of buyers that have given us explicit feedback regarding what they are after across all industries is a huge benefit that we bring to our clients that boutique, industry specialized M&A firms cannot provide.

Don’t just take my word for it, take a look at the success we have had across a wide range of industries with buyers from all sorts of sectors:

And have a listen to a few of our clients who are really glad that we have relationships with thousands of buyers across all industries:

Hopefully by now you have a better understanding of the reality that the optimal buyer for your firm may be in an industry you wouldn’t even consider on your radar screen. And, that hiring a firm like Generational Equity will expose you to a much broader buyer base than using your cousin Larry (or any single industry focused M&A firm) who will simply use the same list of buyers that they do on every engagement.

Interested in learning more about how our dealmakers can benefit you and your firm? Then give us a call at 972-232-1121 or visit our website, provide us with your contact information, and we will be in touch.

If you believe that you are not ready today to exit, we also hold highly educational exit planning conferences throughout North America that are designed to help you learn as much as you can about how to eventually find an optimal buyer for your business. Even if you never hire us to represent you, attending one of our conferences can be incredibly helpful to you in the future. Here is what a few attendees of our conferences have said about the benefits of attending:

Here’s the long and the short of it: Even if you are not ready to exit today, what you learn at our conference will prepare you for the process of exiting. Whether your terminus is one year out or ten, preparation is key and knowledge that buyers outside of your industry may find your business attractive is critical to your exit planning success.

By Carl Doerksen, Director of Corporate Development at Generational Equity.

© 2021 Generational Equity, LLC. All Rights Reserved.

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T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.
Bryan D. Horn, Owner, Over Under Clothing
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.
Ralph Noblin, President of Noblin & Associates
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.
Terry D. Wickman, President, Keytroller
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.
Larry Moore, Owner, A Company Portable Restrooms
We had the pleasure of working with Mr. Ahmad Behjati Managing Director, M&A, for Generational Equity during our acquisition of Papa's Dodge in late 2021. Generational Equity and Mr. Behjati represented and marketed Papa’s Dodge. As our primary contact, Mr. Behjati was professional in every facet of this acquisition process, conveying valuable advice most times and assisting us in every step of the process.
Rick Greene of Dobbs Equity Partners LLC
I decided to attend the conference and hopefully receive some guidance on how to structure an exit plan of my business. Upon arriving at the conference, I was so impressed with the presentation given by Generational Equity that I set a future appointment that week to discuss the possibility of selling my business with their Senior Managing Director David Robinson.
JoAnn Ellis, Owner of Fondren 5 Star Kennels
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Thanks to you, the entire GE team and especially Michael Goss for driving a great valuation, coaching me and driving the process across the finish line. Please let me know if there is anything I can do to support GE going forward. P.S. Given my experience with GE I felt comfortable enough to sign up with Generation Wealth Advisors!
Tom Currier, Former President & CEO, Rackmount Solutions
We thank you Eric and Generational Equity making our dream come true.
Larry Moore, Owner, A Company Portable Restrooms
I wanted to take this opportunity to thank you for all that you have done for us. Not only did you take care of all the aspects of the sale but took extra care to make sure we knew what it looked like every step of the way. I will definitely recommend your company to anyone that is in a position to or looking to exit their business.
Shane and Johanna Kline, Owners of Vision Upfitters
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.
Robert Evans, President and CEO of Mealtracker Dietary Software
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.
Jay Dinnison, Owner of Sharpe Mixers
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.
Bil MacLeslie, CEO, ipHouse
The most important contribution I think Ahmad made was with his personality and work ethic. He is sincere, efficient, and very hard working. He was available to me at all times, whether it was for specific detail of the negotiation or just to talk through the bigger picture. He listened, advised, and recommended, but never forced his idea or opinions. In the time we worked together, he became a valued colleague and also a friend.
Salvo Stoch, Founder and CEO of Sleeping Partners
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.
Terry D. Wickman, President, Keytroller
I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.
Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.
Andy Graham, Vice President, Modern Heating & Plumbing
Through the sale process, Generational brought in several interested buyers and we closed in about 6 months. I am so glad I accepted that invitation to the conference and could not be happier with the whole process. The team at Generational coupled with their knowledge and guidance was so valuable that in the end, I know I could never have done this on my own!
JoAnn Ellis, Owner of Fondren 5 Star Kennels
I am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!
Eric Erlandson, Owner, Action Fastenings, Inc.
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).
Bil MacLeslie, CEO, ipHouse
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.
Robert Evans, President and CEO of Mealtracker Dietary Software
Generational Equity’s assistance was invaluable in compiling and marketing our business.
Bil MacLeslie, CEO, ipHouse
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.
Jay Dinnison, Owner of Sharpe Mixers
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
We were represented by Michael Goss with Generational. The due diligence was grueling and exhausting, but Michael propped us up and kept us motivated throughout the process. Debi and I continued to ask each other how we could possibly make it through this process without the assistance of Michael. Michael's professionalism and knowledge is absolutely amazing, and we are so blessed to have had him by our side as we made our future dreams come true.
Bob and Debi Lee, Owners of BL Technology, Inc and BL Tl Services, LLC
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.
Pete L.
After attending a conference with GE, I decided that the value they bring would be worth the expense and as soon as I started working with them, I realized that was the right decision. When we started to get LOIs, Fred Zweifel took the lead on the communication and supported negotiations throughout the process, which got tricky as we moved forward. I learned that it can be common for companies to make a great offer then work to erode that price with their discoveries, but Fred and the GE team kept that from happening.
Caroline Connelly, CEO, OptoTest
The professionals at Generational Equity then helped develop a roadmap for enhancing the value of the firm and an evaluation report. This was completed by June 14, 2021. We then developed the Confidential Information Memorandum and put Taylor Studios, Inc. on the market by July.
Generational Equity’s professional staff helped me every step of the way. Their network and professionals are the only reason I sold my company this quickly. For me this is a once in a lifetime sale and I was unfamiliar with the process. I was able to lean on them with questions and concerns.
Betty L. Brennan, President, Taylor Studios