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The Pitfalls of Generalist Business Buyers & Investors

Avoiding the Generalist Business Buyer Trap

A few years ago, we consciously shifted our strategic focus away from working with generalist business buyers / investors, directing our efforts towards facilitating trade sales or encouraging transitions to Employee Ownership through Employee Ownership Trusts (EOTs). This strategic realignment was not just a change in direction but a deep-seated commitment to delivering exit strategies that truly resonate with the long-term goals and values of our clients.

The Drawbacks of Generalist Buyers

Our experience has shown that a generalist buyer or investor is seldom the best match for a business owner looking to exit. Often, this mismatch stems from a lack of sector experience and understanding leading to a cautious offer or proposal with unreasonable terms. You don’t know what you don’t know, and with no proven sector experience or synergy from a larger operating business, where does the motivation and commitment originate to outbid a serious trade buyer.  

Many exiting business owners may initially gravitate towards generalist or investor buyers due to a perceived simplicity or broader market appeal. However, more often than not, this route leads to a less than optimal outcome, including low valuations, protracted negotiations, and, in many cases, deal terminations and wasted costs that could have been avoided.

Trade Sale or EOT: The Power of a Blended Approach

In our strategic evolution away from generalist buyers towards more tailored exit solutions, we've not only honed our focus on trade sales and Employee Ownership Trusts (EOTs) but also discovered the immense value of a blended approach. This innovative strategy begins with a trade sale as the primary exit route, while also considering an EOT as an alternative or complementary exit solution, offering a multifaceted approach to business exits.

The initial pursuit of a trade sale allows us to target acquirers that offer significant commercial synergies, potentially unlocking higher value for our clients and ensuring a strategic fit for the business's continued growth. This route aims to match businesses with acquirers who not only understand their intrinsic value but are also well-positioned to propel the business forward through shared goals and resources.

However, the reality of deal-making is that not all negotiations culminate in a successful trade sale, and it's here that the power of a blended approach truly shines. By considering an EOT as an alternate exit pathway, we provide a safety net that preserves the deal's momentum and offers another route to secure the legacy and value of the business. This dual-path strategy ensures that our clients are not left at a standstill should the trade sale path encounter obstacles.

The Advantages of Avoiding Generalist Buyers

Since making this strategic pivot, the benefits for our clients have been clear and significant. By focusing on trade sales or EOTs, we have not only reduced the time, cost and emotional distress associated with engaging the wrong buyers but also minimised the occurrence of aborted deals. This more targeted approach ensures a strategic fit between the buyer and the business, leading to a smoother transaction process and a higher likelihood of deal completion.

Reflecting on Our Strategic Shift

Looking back on our decision to focus on trade sales and EOTs, it's evident that this move was not only commercially prudent but also deeply aligned with our commitment to providing value-driven, bespoke exit strategies for our clients. The positive outcomes we've witnessed since this shift affirm the importance of specialisation and the role of experienced deal makers in facilitating successful business exits. In hindsight, this strategic realignment is a path we wish we had embarked upon sooner, underscoring our ongoing dedication to guiding our clients towards the most advantageous and fitting exit solutions.

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