After the years marked by the pandemic, the issue of succession is once again coming to the forefront for many business owners. According to KfW, as many as 41% of business owners favor an external handover or sale. However, this is anything but an easy decision—after all, a company is sold only once in a lifetime. This makes it all the more important to find a successor who will continue to run the company in the former owner’s best interests. Yet the search for a suitable successor poses major challenges for many business owners.
While M&A or succession advisors can certainly help and orchestrate the entire sales process, M&A advisors in particular—especially those in the market segment for smaller business sales with a purchase price of up to 15 million euros—traditionally have low closing rates. These rates stand at just around 30 percent. The reason is a highly fragmented market.
Establishing contact with interested buyers proves to be particularly difficult, and the pool of potential contacts or business successors is highly opaque. However, it is not only factual factors—such as an outdated corporate structure, a lack of innovation, heavy dependence on the current owner, or unrealistic price expectations—that can lead to a “no-deal.” Another decisive factor is that M&A and succession advisors do not have an equally large, robust network or good market access in every industry or region.
Digitalization and the corresponding technological solutions that have emerged as a result are closing this gap. Increasingly, M&A advisors and sellers are turning to business marketplaces or databases to identify suitable successors. However, the public nature of these digital marketplaces is not without its risks: the employees, customers, and competitors of the business owner seeking a successor could learn of the impending sale. This can unsettle employees, family members, and, of course, customers.
It therefore makes more sense to use private solutions such as the big-data database tool DealCircle, which offers access to a comprehensive pool of buyers. The relevant industry, region, transaction size, and numerous other filter criteria are reviewed for relevance at the start of a new project. From a buyer database that now contains more than a quarter of a million profiles, M&A advisors and sellers receive a free list of potential candidates interested in purchasing once the data matching process is complete. In other words: With DealCircle, advisors and sellers retain full control over the process and decide independently which buyers to approach and which ones receive further information.
Further communication takes place directly between the seller and the respective advisor, as DealCircle—functioning as a sort of “Parship” for M&A transactions—merely facilitates the connection. Consequently, there is no buy-side advisory service. Only when the transaction is actually completed through the platform does DealCircle receive a success fee from the buyer. By ensuring complete anonymity, the matching technology thus significantly increases the likelihood of a transaction.
A glance at the numbers demonstrates just how great the demand is in the market: More than 500 M&A firms in the DACH region already regularly use DealCircle’s free service on behalf of their clients and have access to a database of 200,000 strategic buyers and investors’ portfolio companies, as well as over 10,000 financial investors, family offices, and investment holding companies.
Every inquiry and every deal helps keep the data relevant. This includes, for example, continuous cross-checks with every available, reliable source of business information—such as Majunke, Mergermarket, Creditreform, and Capital IQ—as well as the company’s own proprietary information. After all, the general rule is: The larger and more active the cooperation network, the greater the likelihood of a successful company sale.
In situations critical to success, such as succession planning, it pays for entrepreneurs and their succession advisors to rely on technology-based solutions like DealCircle. Through this matching solution, they can find the right buyers.
Instead of looking for a needle in a haystack, they receive a qualified, customized shortlist within a few days—completely free of charge. This targeted process increases the likelihood of a transaction and ensures a successful deal flow at every level.
