Episode 47: 7 Reasons Why Investors & Acquirers Buy

In this episode of The 7% Club Podcast, I explore a crucial question for founders and business owners: What makes a business attractive to investors and acquirers?

With a generational wave of business ownership change on the horizon - especially, as many Baby Boomer–led companies prepare for sale - the stakes have never been higher. Whether you’re planning to step back, exit in the next few years, or even considering acquisitions yourself, understanding why buyers buy, is the key to maximising value.

Too many founders wait until they’re ready to sell before thinking about value. By then, it’s often too late to optimise returns. The reality is: acquirers aren’t just buying your revenue or client base - they’re buying opportunity, growth potential, and reduced risk.

I break down the 7 most common reasons investors and acquirers purchase businesses and what you can do now to make your company more attractive.

🔑 Key Takeaways:

1. Access to new markets & customer segments – Buyers may acquire to expand into new regions or niche markets quickly.
2. Intellectual property & proprietary systems – Proven, commercialised IP is a valuable shortcut for buyers.
3. Speed to scale – Acquisition accelerates growth far faster than organic methods.
4. Industry roll-up strategies – Investors consolidate small firms to dominate a market.
5. Client base & recurring revenue – Loyal, compatible clients with annuity income streams increase attractiveness.
6. Distribution channels – Established sales or distribution networks can open new pathways for buyers.
7. Brand value – Strong, trusted brands with sustainable margins are prime acquisition targets.

The time to think about your exit strategy isn’t later - it’s now.

Connect

💡 Need help scaling your business from 7 to 8 figures? Get in touch jenny@jennystilwell.com.au

Remember: Better strategy, better business, better life! See you next time!

Transcript

SPEAKER_00: 0:01

Hi there, this is Jenny Stilwell and welcome to the 7% Club podcast for the 7% of business owners who break through 2 million in sales and for those on track to join this club. This podcast is to help you upscale.

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SPEAKER_00: 0:19

In today's episode of the 7 Percent Club podcast, I'm talking about why investors and acquirers buy. And it's a topic that comes up a lot. It's certainly coming up a lot more now with a massive amount of businesses that are about to change hands from all the baby boomer companies. There'll be a massive shift over the next few years. And I think anyone who starts a business and is able to scale it will definitely be thinking about selling it. at some point in the future. So if you are a founder and thinking about stepping back from the day to day, or possibly exiting at some point, the time to think strategically about the value of your business is now, not at the point at which you're ready to sell. And most founders wait too long. And as a result of that, they fail to optimise the true value and returns that they could be getting from all those years of hard work building their business. And the The reality is buyers are not just building your revenue or your client base. They're buying opportunity, they're buying growth potential, and they're also looking to buy reduced risk. And if you're not building your growth strategy with these factors in mind, it's really time to shift your strategy. So this episode is for you. If you're not sure what would make your business attractive to a buyer, if you've never sold a business before and don't know what acquired are looking for, and if you're a founder considering a sale or exit in the next three to five years. And it could also be for you if you're considering an acquisition yourself. So this will help identify some of the reasons that you may acquire another business. Having said that, let's have a look at what investors and acquirers are looking for. And there are many benefits that they seek out, but these are the most common. So So acquirers want quick access to new geographies or new customer segments. So if your business gives them a foothold in a different city or region or country or even into a niche client base, they could be interested. So for example, a Sydney firm may acquire a Melbourne-based company to build national reach. Or an international company may acquire your business to shortcut entry into the Australian or New Zealand market. market. Now, I'm talking specific countries in my part of the world and states, but the same principle applies wherever you are in the world. So your business could provide access to new market segments. So another example, a general recruitment firm that has no legal practice may acquire a specialist legal recruitment firm. And international companies often use acquisition as their new market entry strategy. An acquiring company in an international market instant Number two, intellectual property and proprietary systems. So if you've developed unique methodologies, proprietary technology or software or specialist IP, buyers see that as difficult to replicate and therefore valuable. And it's often easier to acquire IP than to build it, particularly if the IP is software. But it must be commercialised and it must be proven. And that then reduces the risk for acquirers of having to invest in the development and market testing of software themselves. Okay, number three is speed to scale. So growth through acquisition obviously is faster than organic growth, much faster. And very strategic buyers may want to scale quickly for an IPO, which is an initial public offer if they're going public, to attract their own acquisition or to strengthen market position. And small businesses are easier to integrate, making them a far more attractive bolt-on acquisition. Number four, industry roll-up. Now, some investors will consolidate an industry where there may be hundreds of small businesses, each competing for a small percentage of the market. Examples could be in marketing, trades or certain professional services. So investors may look to roll up a series of these much smaller firms to create one dominant player. So in the roll-up they'll acquire many of the small businesses forming one large new company that has already made a major share of the market and economies of scale. And if a business is profitable, well-run and cleanly structured, it could be a prime target. So for example, in the Australian market, Shadforth Financial Group was formed in 2008 and it acquired 14 different accounting practices and financial services firms. And then it was actually acquired by a much larger company only six years later. So that was a very strategic move in, acquire lots of smaller companies in the financial services and accounting sector, build it into a large national entity and then have it sold off in 2014, only six years later. client base and recurring revenue is a very attractive model so obviously again faster to acquire than to grow organically a client base that is compatible that's the key word compatible with the acquiring business will provide a new built-in market for the acquirers existing products and services so if the acquired client base also has an associated annuity or ongoing income so such as support fees or hosting fees, maintenance fees or retainers, that is even better. So if that's something that you can do in your own business to make it more valuable, it's certainly a good strategy and it makes your company a lot more attractive to a potential acquirer. Number six, access to distribution channels. Acquirers want distribution channels that provide increased market access for their products and services. And these channels can obviously be online or offline, national or international, niche or mass market. So if, for example, your business had a field sales force that service national pharmacy networks, your business may be very attractive to a pharmaceutical or cosmetic company that wanted increased national distribution through pharmacies. That's just one example, but there's many where one company has the channels and the other company has Number seven, brand value. A trusted brand with high recognition and profitable, sustainable margins is very attractive to acquirers, whether the brand is a service or a product. And there are companies and investors that focus on acquiring stables of strong brands for both national and international markets. and international markets. So if you've got strong brands, either your own or you may have exclusive distribution rights for a geographic region for someone else's brand, this will be attractive to the right investors and add considerable value to your business. If your company's in the business of selling and marketing brands, make sure they're your own or have contracted and exclusive distribution rights with a valuable third-party brand. And there's numerous companies who've built portfolios of brands through acquisition, both globally and locally, with mass markets and prestige brands. So there's companies that have portfolios of luxury brands. There's companies that have portfolios of consumer brands. And it's a very, very core strategy for those sorts of companies to always be on the lookout for other businesses that have built-in brand value. So they are some of the key things that investors and acquirers look for in a business. So it's worth it to take some time and have a look at your own business and see what would make your company attractive to an acquirer and then start to put some strategies in place to build on those things that would make your company attractive. In another upcoming podcast, I'm going to be talking about what will make an So not only what are some of the things that make your business attractive, but what would make an acquirer pick your business over anyone else's and what strategies you can implement to make your company a more valuable asset.

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SPEAKER_00: 9:51

And that's all for today's episode of the 7% Club. Thank you so much for listening. And as always, wherever you are in the world, remember, better strategy, better business, better life.