Timing M&A, Part III: If the Market Talks, Listen

How do you know if there will be a set of qualified, motivated buyers for your company?

There is an old joke that seems fitting here.  

There was a man called Jim, who lived near a river. Jim was a very religious man.
One day, the river rose over the banks and flooded the town, and Jim
was forced to climb onto his porch roof. While sitting there, a man in
a boat comes along and tells Jim to get in the boat with him. Jim says
“No, that’s ok. God will take care of me.” So, the man in the boat
drives off.

The water rises, so Jim climbs onto his roof. At that time, another
boat comes along and the person in that one tells Jim to get in. Jim
replies, “No, that’s ok. God will take care of me.” The person in the
boat then leaves.

The water rises even more, and Jim climbs on his chimney. Then a
helicopter comes and lowers a ladder. The woman in the helicopter
tells Jim to climb up the ladder and get in. Jim tells her “That’s
ok.” The woman says “Are you sure?” Jim says, “Yeah, I’m sure God will
take care of me.

Finally, the water rises too high and Jim drowns. Jim gets up to
Heaven and is face-to-face with God. Jim says to God “You told me you
would take care of me!  What happened?”

God replied “Well, I sent you two boats and a helicopter. What else
did you want?”

If multiple buyers are knocking on your door, the market is talking.  It doesn’t necessarily mean that you should sell.  It does mean that, if you are thinking about selling, there is likely a healthy market of potential buyers.

If there are two or more knocking, it’s likely there are even more who would be interested if they had the chance to look at your company.

There is one caveat here:  all potential buyers knocking on your door are not created equal.  We’ll tackle this in the next post.

What if nobody is knocking on your door?  Usually, this means there is not a strong market for your company.  However, there are some times when companies are under the radar.  Even though nobody is knocking on their door, buyers would be interested in them.   Perhaps a company doesn’t spend much on marketing or get any attention from TechCrunch.  Or maybe it’s in a hyper-growth mode and its market footprint is much bigger than buyers would guess.

The best sign of a healthy market for selling your company is if multiple potential buyers have expressed interest.  But, it’s not the only sign.