The lower middle market is a dynamic and often misunderstood segment of the business landscape. Nestled between small businesses and larger corporations, companies in this bracket have unique attributes and challenges, especially when contemplating a sale. As expert operators, investors, and investment bankers focused on this segment of the market, we frequently impart the wisdom to our clients: “It’s better to be bought than sold.”
But what does this renowned M&A advice truly mean? And why does it resonate so deeply with the ethos at Astria, a premier advisory firm specializing in family-owned business exits, M&A, and sales?
The Meaning Behind “It’s Better to Be Bought Than Sold
This phrase goes beyond mere words; it’s about transaction power dynamics. When buyers proactively come to you, recognizing the intrinsic value of your company, it places you in a stronger negotiation position. You’re not “peddling” your business or appearing desperate for a sale. Instead, the intrinsic value of your company shines through, attracting potential suitors.
Contrast this with the scenario where a company aggressively seeks out buyers, which can sometimes signal vulnerability or desperation. In such instances, the negotiation power might tilt towards the buyer, potentially leading to undervalued offers or unfavorable terms.
Astria’s Ethos: Readiness and Profitability
At Astria, our two central pillars—readiness for sale and sustained profitability—resonate with the ethos of the PROFIT Framework.
Readiness to Sell: At Astria, we advocate for businesses always to be sale-ready. This means maintaining clear financial records, having efficient operations, and building a strong leadership team. When these elements are in place, not only does it make the due diligence process smoother, but it showcases the company in the best possible light. Moreover, this operational readiness invariably attracts potential buyers because they can visualize the company’s potential under their stewardship.
Sustained Profitability: Profitability isn’t just about immediate gains. In the investment realm, especially within the lower middle market, consistent profitability trends project stability, scalability, and predictability—all highly attractive features for prospective buyers. At Astria, we stress the importance of sustainable growth strategies that don’t just inflate short-term numbers but build a foundation for long-term financial success.
The Strategic Advantage
When you integrate these principles—operating with an ever-ready selling mindset and continually refining profitability avenues—it creates a magnetic effect.
Buyers, whether strategic competitors, private equity firms, or industry conglomerates, are drawn to such companies. They recognize the value, not just in terms of financial metrics but in terms of potential growth and scalability. Moreover, by pursuing this approach, you can establish your company as a “strategic must-own asset,” differentiating it from just another transactional opportunity. This positions your business in a way that often results in a higher valuation and more favorable terms for the seller.
Perception is Everything
In the world of mergers and acquisitions, perception is everything. A company that needs to be sold is viewed vastly differently than a company that stands tall, inviting buyers to recognize its worth.
If there’s one takeaway we hope you gather from this, it’s this: aim to be in a position where your company’s merits, profitability, and readiness make it a sought-after gem in the lower middle market.
When buyers come knocking on your door, rather than the other way around, it’s a testament to the company’s inherent value and the strategic groundwork laid down over the years.
At Astria, we’re here to partner with you on this journey, ensuring that when the time is right, you don’t just sell—but you sell on your terms, your timeline, and at the value you deserve.
Ready to Elevate Your Business Value?
Join hands with Astria today and embark on a transformative journey towards maximizing your company’s worth in the lower middle market. With insights derived from our deep understanding of this segment, we offer tailored solutions that resonate with the unique challenges and opportunities it presents.
Tap into our expertise, honed from years of focusing on family-owned business exits, M&A, and sales. With Astria by your side, always be in the driver’s seat, steering your business’s future with confidence and foresight.
