Off market acquisitions
Why the businesses worth buying are rarely the ones being marketed, what an off market approach actually involves, and what it costs in time and money.
The businesses worth acquiring are usually not for sale. Not because their owners would never sell, but because they have not thought about it, have not been approached properly, and have no reason to go through a public process.
If you only look at what is actively marketed, you are choosing from a small and heavily contested slice of the market.
Where the businesses actually are
Illustrative, for a defined sector and size band.
Why the visible market is the difficult one
A business being openly marketed has three characteristics that work against you.
Everyone has seen it. You are one of several parties, which means competitive tension against you rather than for you.
There is often a reason it is available. Not always, and plenty of good businesses sell openly. But the ones that have been sitting on a list for a year usually have something behind that.
The seller has already decided. Which sounds helpful and means the price expectation is set, the process is running on their timetable, and there is little room to shape the deal around what you actually want.
What an off market approach actually involves
It is not a mailshot. A well run off market search is slow, specific and mostly unglamorous.
- Building the universe. Every business matching the brief, identified from filings, accreditation registers, trade bodies and sector knowledge rather than from who is advertising.
- Qualifying from the outside. Filed accounts, shareholder age and structure, group relationships, recent filings that suggest a change. Situation matters as much as size.
- Prioritising. A ranked list rather than a long one, because the order you approach in matters.
- The approach itself. Owner to owner in tone, specific about why them, and not a template. Most owners receive several of these a month and delete all of them.
- The conversation. Usually a long one, often over months, frequently starting with no and ending somewhere else.
- Then a normal process. Valuation, heads of terms, diligence.
Most of the effort sits before anyone says yes. That is the work, and it is what the 30 day pilot tests.
See how the pilot worksWhat it costs in time
More than acquirers expect, and the time is front loaded into work that produces nothing visible.
Building and qualifying a universe of a few hundred businesses is weeks of work. Approaches run over months because owners do not reply to the first one, and the ones who do reply often say no and mean it for a year. A search that ends in a completed deal commonly runs twelve to eighteen months from first approach.
The part acquirers find hardest is that a successful search produces a great deal of nothing before it produces anything. Nine conversations that go nowhere are not failure, they are the mechanism.
What it costs in money
Covered properly on our what an acquisition search costs page, but in short: an upfront or retained element for the search work, and a success fee on completion.
An entirely success based search sounds attractive and usually produces a lower quality of effort, because the adviser is incentivised to find you something rather than the right thing.
Why owners respond to a good approach
The ones who engage are rarely being persuaded to sell. They are usually somewhere on a thought they have already had.
- Retirement within a few years and no obvious successor
- A management team who could run it but could not buy it
- A business that has outgrown what the owner wants to carry personally
- Contracts or opportunities requiring a balance sheet they do not have
- A shareholder disagreement that needs resolving
- Having said no to three bad approaches and being curious about a good one
None of those are visible from the outside, which is exactly why the market for them is not public.
What makes an approach work
Specificity. Why this business, in terms that prove you understand what it does. Generic approaches get deleted because owners receive them constantly.
Credibility. Who you are, why you are buying, and evidence you can complete. Funding sorted before the approach, not after.
Discretion. An owner’s first fear is staff and customers finding out. Anything that risks that ends the conversation.
Patience. The right answer today is often no. The same owner two years later is frequently a different conversation, which is why a search is a relationship rather than a campaign.
How we run it
Our 30 day deal sourcing pilot starts with the brief, builds and qualifies the universe, and makes the first approaches, so you can see the quality of what comes back before committing to a full search. If it does not deliver, you get your money back.
A tight brief makes all of it work, which is why it is worth reading the acquisition criteria page first.
Answered.
What does off market actually mean?
Approaching businesses that are not for sale and have not been marketed, rather than reviewing what is currently available. It means identifying every business matching your criteria, qualifying them from filed information, and approaching the owners directly.
Why not just look at what is for sale?
Because it is a small and heavily contested fraction of the businesses that would actually consider a sale. Anything openly marketed has been seen by everyone, the price expectation is already set, and you are competing rather than negotiating.
How long does an off market search take?
Longer than most acquirers expect. Building and qualifying the universe is weeks, approaches run over months because owners rarely reply to the first one, and a search ending in a completed deal commonly runs twelve to eighteen months from first approach.
Do owners actually respond to unsolicited approaches?
Some do, and the ones who engage are usually already somewhere on a thought about succession or scale. What decides it is whether the approach is specific enough to prove you understand their business, credible on funding, and discreet. Generic approaches get deleted because owners receive them constantly.
See the quality before you commit
The pilot builds the universe, qualifies it and makes the first approaches, so you can judge what comes back. Money back if it does not deliver.
See how the pilot works