As the M&A market settles back into more challenging territory in 2024, companies are being urged to reconsider their approach to exits. Victor Basta, CEO and Founder of DAI Magister, suggests that traditional methods of hiring an M&A banker to sell a business may be part of the reason why 50% of deals fail.
With exits over $100 million now at their lowest since the 2018-19 period, and with high interest rates and a surge in public companies going private, businesses are finding it harder to achieve successful exits.
Basta proposes a two-stage M&A process designed to improve outcomes. In the first stage, companies focus on building value quietly, without rushing to market or approaching potential buyers en masse. This stage, which can last between 6-18 months, allows companies to strategically prepare for a sale by cultivating interest from key buyers, addressing potential deal blockers, and positioning themselves as a valuable acquisition. The second stage is a formal M&A process that leverages the groundwork laid in stage one to drive competitive tension and maximise value.
Basta explains: “Success in M&A exits hinges on two factors: certainty and price. The conventional approach—marketing the business for sale – often fails to secure either. DAI Magister’s experience shows that this reactive process can result in a lower price or uncertainty around closing. Instead, by taking time to develop relationships and build a compelling narrative, companies are more likely to be bought, rather than sold.”
DAI Magister’s strategy allows potential buyers to gain a deeper understanding of the company’s value well before entering the formal sale process. By the time the second stage begins, buyers are not only engaged but motivated to act quickly, having already recognised the strategic fit and benefits of the acquisition.
The gradual, two-stage method also helps to avoid the pitfalls of traditional M&A processes, where companies are often forced to chase buyers and accept unfavourable terms. By pre-qualifying buyers and creating momentum early on, the process shifts power to the selling company, enabling better negotiations and higher valuations.
While there are instances where a quicker, more traditional approach might work—such as when there’s already a clear set of potential buyers – Basta warns that companies should avoid rushing into the sale process by default. By embracing a longer-term, carefully managed strategy, businesses in the M&A market can navigate the current economic challenges and emerge with stronger, more successful exits.
