What Buyers really want in a Staffing Acquisition!

By: Bob Cohen and Sam Sacco
Date: 5/1/2008

There are many good reasons for acquiring a staffing business. Many buyers seek the opportunity to share your customer relationships, increase their service offerings, expand their geographic footprint, increase their market share, increase profits, and obtain greater economies of scale while lowering their unit processing costs. These are all valid motivators and strong drivers for acquirers.

Those are the general reasons. What are the specific reasons they will find your business more appealing than another staffing business?

Operating in a specialized area of staffing, generating above average year over year growth, higher than usual gross margins and higher profitability than your industry sector typically generates are all very nice and very positive attributes that will most likely help you attract better than average offers for your business.

However, it may surprise some to learn that what Buyers are really willing to pay for is often tied to how safe and secure they perceive their proposed investment to be and how likely it is to deliver a reasonable and consistent return on their invested resources.

Since every purchaser, in order to justify their investment, must believe that the acquired business will generate more in profits in the future than its cost today, assurance/comfort with a high probability of positive and stable future business results will be a key determinant of perceived current value.

The particular order of the following elements and how each is measured may vary from Buyer to Buyer (that is, they are Buyer specific), however most Buyers will be seeking in some order of priority:

• Reasonably Predictable and Consistent Earnings;

• A Strong Management Team behind the Owners,

Tied into the Future Performance of the Business;

• A Diverse and Growing Customer Base;

• A Desirable and Growing Market;

• Solid Systems and Infrastructure;

• Stable and Growing Customer Relationships;

• Strong and Positive Market Presence;

• Strong, sector-specific Gross Margins;

• Strong, Upside Growth Potential;

• Strong Ethical Standards;

• Low Staff and Customer Turnover;

• Clean Record-Keeping.

In some cases the above factors will be measured in comparative degrees since it can be difficult to apply an absolute scale to some of the factors. However, it is done and Buyers will decide how much they are willing to pay for your business based on their perception of how well you will do on many of these factors.

One of our most important jobs when representing a Seller to Buyers is how we position these attributes most desired by each Buyer. We are not spin doctors.

Any solid relationship between a potential Seller and a potential Buyer must be based on truthfulness, so all parties know what they can expect.

Obviously, all Buyers would like to be able to grade each Seller target candidate they are considering 10 out of 10 on each attribute on their acquisition Report Card, but rarely is this possible.

Within the highest ethical and credibility boundaries of not hiding any wart(s) or stretching any truths, properly presenting or packaging a Seller's story can make a difference in how that business is perceived.

However, since we know that any attempt to skip over, hide or understate any negative attribute creates larger challenges for the Seller, it is best to lead up front with any possible perceived negative aspect and deal with it honestly.

If the Buyer cannot get past whatever issue may be there, they will only resent spending more time on this project without being fully aware of the matter.

The important information here is how you can prepare your business to score as high as possible on a Buyer's Report Card.

For more information, contact Bob Cohen at 416-229-6462 or Sam Sacco at 910-509-0691. email contacts are, bob@racohenconsulting.com or sam@racohenconsulting.com.

Sam and Bob have successfully completed over 100 staffing industry transactions.