Have you been considering selling your regional business? You may have been thinking about it already, or you might have already started to formulate an exit strategy.
In this article, we'll explore why buyers are interested in regional businesses, and ways to maximise your sale value.
Nash Advisory is experienced at selling businesses at all stages, in all locations. We can help you learn more about what it takes to sell your business.
Why buyers buy regional businesses
To understand which buyers will be interested in acquiring your regional business, we must first examine why buyers might be interested in your business.
Regional businesses can be unique, and may have different appeal to those located in metropolitan areas.
- Regional businesses can have lower overheads costs.
- They often hold a strategic location between large metropolitan centres for distribution or transport.
- They may have cheaper access to transport through airports or regional rail links.
- They can more easily establish or grow market presence in regional areas.
- They can increase development opportunities for the business and increase social impact.
- There are incentives to invest regionally (For example, there are government grants and subsidies to invest and hire regionally).
- They are often in proximity to inputs of the buyer’s primary business activity (For example, a cereal maker could purchase a facility near a regional wheat location).
There is strong rationale for buyers to buy your regional business, however the negatives must also be considered.
- It may be harder to attract talent in regional areas and maintain staff.
- Climate factors can impact on the business.
- Regional businesses are often quite small in financial size compared to a business that performs the same task in the city.
Now that we understand the positives and negatives that impact upon a buyers decision to purchase a regional business, we can investigate the different types of buyers.
Buyers for regional businesses
It doesn't matter where a business is located. If it is doing well and has value, chances are that there will be many interested buyers. Finding a buyer is an important part of a successful exit strategy.
There are three main facets of buyers that might consider buying your regional business:
- Local competitors in the same market and niche as your business.
- Trade buyers in similar industries, but not necessarily in the same market.
- Private equity, who see the future benefit of investing in your business.
Local competitors can sometimes be perfect buyers for your business, however it's important not to discount other trade and private equity buyers that may deliver a higher sale vale.
Trade buyers are larger companies that acquire or purchase an existing business. These buyers are usually established businesses in the same industry, with vertical or horizontal synergies available if they were to purchase your regional business.
These buyers may be larger private companies or companies listed on the Australian Stock Exchange (ASX).
In recent times, private equity businesses have started to invest more heavily in regional areas.
To learn more about the difference between trade buyers and private equity buyers, you can read more here.
If you’re considering selling your business, it pays to ensure that the deal is managed by experts with previous experience in selling regional businesses.
When you sell your business with Nash Advisory, our experienced team will ensure that the full market of buyers is explored, and the full value of the business is realised upon sale.