M&A Talk: What sellers look for in an ideal buyer

As SiGMA Europe 2023 approaches, where thousands of entrepreneurs, business owners, and investors in the online gambling industry descend on the Mediterranean island of Malta, M&A is sure to be a hot topic once again.

As anyone in the business world knows, M&A is the stuff of legend, where giants are forged and the future of industries can be rewritten in a single deal.

As the iGaming industry continues to consolidate through acquisitions, for many, the world of M&A is shrouded in mystery with details of transactions only ever emerging once deals close, through highly manicured and carefully worded press releases.

But what exactly goes on behind the scenes? And of all the deals that get done every year around the world, what are the “make it or break it” factors that separate M&A transactions which survive from those which thrive? And perhaps more importantly, what are sellers looking for in an ideal buyer?

In an effort to give our readers some insight into the fascinating world of mergers and acquisitions, we caught up with Andrew McGrath, digital acquisitions specialist at M&A advisory Valament, to have a chat.

The Makings of an Ideal Buyer

SiGMA – For a seller, especially in sectors as dynamic as iGaming, ad tech, and digital media, the choice of buyer is pivotal, but what should they be looking for in an ideal buyer?

VALAMENT – It’s a great question and it’s actually quite straightforward. It really comes down to four key considerations: financial assurance, experience in growth through M&A, shared visions on the future, and a strong cultural resonance. While these might seem like buzzwords, in practice, they’re the cornerstone of many successful M&A deals in the digital space.

“While price is a crucial factor, sellers need assurance that a buyer can genuinely meet the deal’s financial obligations.”

SiGMA – What do you mean by financial assurance?

VALAMENT – Is the buyer in a solid financial position? Does the buyer have a reservoir of capital ready to seal the deal, or are they stretching their resources thin and banking heavily on external financing? On the surface, the price tag attached to a deal might seem like the be-all and end-all, and while price is a crucial factor, sellers need assurance that a buyer can genuinely meet the deal’s financial obligations. The M&A process can be a rigorous, meticulous endeavor that demands time, energy, and money, so sellers are often skeptical about embarking on this journey unless they’re certain about the stability of a potential buyer’s financial foundations.

“Sellers need to know that a buyer has a track record of handling the post-acquisition phase efficiently.”

SiGMA – You mention the importance of a buyer’s ability to demonstrate experience in growth through M&A. How much weight do sellers place on the buyer’s track record with previous acquisitions?

VALAMENT: Past behavior is usually a good predictor of future actions. First off, a buyer who is experienced with M&A will give a seller reassurance that they won’t drop out mid-way and that they understand the rhythm of the process end to end. This counts for a lot.

Also, crucially, if a buyer has a history of successful integrations, where acquired companies have flourished, it adds a layer of trust and credibility. Sellers need to know that a buyer has a track record of handling the post-acquisition phase efficiently. In a world where the stakes are high, and the future of a business is on the line, leaning on a buyer’s experience can make all the difference.

A great example is the 2022 deal Valament brokered for AdCash, a global online advertising platform for media buyers, affiliates, ad networks and publishers, based in Tallinn. There were plenty of buyers lined up and interested, but they ultimately went with a buyer that could point to several seamless acquisitions in the digital space. The deciding factor? This particular buyer had not only successfully integrated acquired companies into their portfolio but had a stellar reputation for enhancing the value of these entities, fostering growth, and ensuring the retained talent felt empowered and motivated in the new environment. It underscored the truth we often emphasize: past successes in M&A are more than just accolades; they’re reassurances of future potential and commitment.

“For many sellers, it’s about a lot more than just the money. They want to know their business baby is in safe hands.”

SiGMA – It’s clear to us that in the world of M&A it takes two to tango. Can you give us some insight on the concept of shared visions and how this might factor into a seller’s choice of dance partner, errr …buyer?

VALAMENT: For many sellers, especially founders, it’s about a lot more than just the money. They want to know their business baby is in safe hands, and that the buyer’s future intentions complement or elevate the existing vision. Imagine you’ve spent years, maybe decades, crafting a business model, a brand, and a unique proposition. You’ve built teams and forged relationships. Would you want someone to come in and dismantle that overnight? Of course not. Sellers often seek buyers who not only recognize the inherent value in what’s been built but also have plans to build upon that foundation, rather than replace it. It’s akin to passing a baton in a relay race; the next runner doesn’t stand still or go backward—they sprint forward, but the momentum is built on the previous runner’s efforts.

SiGMA – How important is the post-acquisition plan to a seller when considering a potential buyer?

VALAMENT – It’s pivotal. Sellers want insights into how their business will evolve

post-acquisition. Whether it’s expansion plans, potential pivots, or even talent retention, a well-laid-out post-acquisition strategy can be a significant differentiator for a buyer.

SiGMA – You make reference to the importance cultural resonance / fit. How does this work, in practice, and how much of a factor is it, ultimately?

VALAMENT – M&A is not just about integrating businesses, but also cultures. A synergy in organizational cultures can lead to a smoother transition, ensuring longevity and success

post-acquisition. Why is this so vital? Think about it: two companies might look perfect for each other on paper, but if their internal cultures clash, it’s like mixing oil and water. Employees, the heartbeat of any organization, can become disheartened, confused, or even leave if they feel like they don’t fit into the new merged entity. A shared ethos, values, and work environment can often be the silent underpinning of a successful merger. It’s about more than just business operations; it’s about creating a harmonious, unified team that feels connected and motivated under the new banner.

“Success in M&A is not just about making a deal, but making the right deal.”

SiGMA – Any more wisdom to share for business owners considering an exit, and exploring M&A?

VALAMENT – Yes! Do yourself and your business a favour and enlist the help of a qualified M&A advisory. Navigating the intricate landscape of mergers and acquisitions can be challenging, and mistakes can be costly. At Valament, we pride ourselves on our proven track record in the digital M&A space. Our experienced team has brokered numerous successful deals, ensuring that both sellers and buyers achieve their desired outcomes. When it comes to pivotal decisions concerning the future of your business, you need to trust in the expertise and experience that the M&A advisory you’re working with brings to the table. The way we see it, success in M&A is not just about making a deal, but making the right deal.

Strategic Moves in a Digital World

The realm of iGaming, digital media, and ad tech is constantly evolving. As businesses in these sectors grow and mature, M&A activities become an inevitable part of their journey. For sellers, the choice of buyer can determine the future trajectory of their brand, their team, and their legacy.

“As the M&A world continues its dance, sellers are becoming more astute in their choice of partners…”

In such a landscape, the concept of an ideal buyer goes beyond financial metrics. As Andrew McGrath aptly sums up, “In M&A, especially in the digital domain, it’s a marriage of visions.

Money is a part of the equation, but the real magic lies in strategic, cultural, and future-oriented alignment.”

As the M&A world continues its dance, sellers are becoming more astute in their choice of partners. They’re looking beyond the surface, seeking buyers who not only offer financial stability but also resonate with their vision, culture, and aspirations for the future. It’s a delicate balance, but when achieved, it paves the way for enduring success.

Join us in Malta between the 13 – 17 November for SiGMA Europe 2023

SiGMA Europe’s Malta Week festival brings together a diverse and international group of industry leaders for a convergence of expo, conference, and networking. The event will be held at the Mediterranean Maritime Hub (MMH), a larger, more dynamic venue that promises a raw, industrial, and unconventional space unlike anything ever used before.