Mergers & Acquisitions

Resources: M&A Encyclopedia

Comprehensive articles on every step of the process of buying or selling a business from the most exhaustive encyclopedia of M&A articles in the industry.

M&A Basics | Fishing vs. Hunting for Buyers of Your Company

Which is the right tool to use to sell your company: a fishing rod or a rifle?

A fishing rod involves casting a line, dropping the bait, and waiting for a nibble. In the world of selling a business, the “fishing rod” approach entails confidentially marketing your business for sale using various media: online media, trade publications, newspapers, and others. This is a passive approach in which you patiently wait like a fisherman for a fish to take the bait.

Selling a business with a rifle, on the other hand, involves knowing exactly who your target is, tracking them down, confronting them directly, and firing an accurate shot right at the bullseye. Selling a business with a rifle is an active, involved process (think costlier and more time-consuming) that requires planning, discipline, accuracy, and stealth (confidentiality).

In some cases, you can use both. But you usually fish for smaller creatures (e.g., bass, salmon, tuna, crappie, trout), while you hunt for larger beasts (e.g., deer, elk, bison, moose). It’s no different in the M&A world.

Small businesses — those with annual revenue of less than $10 million — are almost exclusively purchased by individuals (about 95% to 99% of the time) and are not usually acquired by companies. This is why fishing is the more suitable tactic for attracting these buyers. And because companies and private equity firms are more likely to be buyers of mid-sized businesses, hunting is the preferred approach in these instances.

Next, you must figure out the most efficient way to contact your targeted market. Do you hunt them down directly? Or, is it more effective to advertise your business for sale in a form of targeted media that reaches those who are actively looking for businesses to buy?

In this article, we walk you through who is most likely to buy your business, and then we tell you how to design a marketing strategy to best reach them.

Ready? Let’s go hunting! Or fishing. Or both!

Table of Contents

  • What’s the Most Efficient Method for Contacting Buyers?
  • When to Fish for Buyers
  • When to Hunt for Buyers
  • Summary

What’s the Most Efficient Method for Contacting Buyers?

Small Businesses: Because the target market for small businesses is primarily individuals, the most efficient and cost-effective method of contacting those buyers is through targeted forms of media, in which those individuals have identified themselves as potential buyers of businesses — or fishing. In other words, this group of people has already been corralled for you, thus making the process more efficient and therefore cost-effective.

Mid-Sized Businesses: On the other hand, the most effective method for selling a mid-sized business — and for contacting companies and private equity firms — is through a mix of hunting and fishing.

When to Fish for Buyers

The most cost-effective method for selling a small business is by confidentially marketing the business on specialized business-for-sale portals. Fishing for buyers is best done using specialized business-for-sale portals or other targeted media.

Individuals can only be cost-effectively targeted through advertisements. It wouldn’t be realistic to directly contact (hunt) individuals to purchase your business.

When to Hunt for Buyers

Hunting for buyers is only practical for selling a business that is likely to be purchased by a company.

When hunting, you should only approach those targets that are ready, willing, and able to take action. You will know this by researching the company and determining how many acquisitions it has made in the past. The more companies it has purchased recently, the more likely it is that it will buy another company.

An overwhelming majority of smaller companies are not ready, willing, and able to spend hundreds of thousands or millions of dollars to purchase a competitor. There are exceptions, of course, but in general only mid-sized and larger companies grow through acquisitions.

When hunting, does company size matter?

Be particularly wary of smaller companies with revenue of less than $10 million per year that contact you to purchase your company. Unlike what most people believe, smaller companies do not regularly acquire other companies. Why? Because they are too busy putting out fires and chasing the next big customer to be proactive enough to create a team focused on developing and executing an acquisition strategy.

Smaller companies typically grow organically — by slowly increasing their marketing and advertising budgets. Most of them are in a state of disorganized chaos, busy chasing the next big deal or new big customer, and do not have large cash reserves to pursue acquisitions as a growth strategy. Attempting to sell your business to smaller companies is, therefore, an ineffective strategy that can waste an enormous amount of time.

Larger companies and business deals: Size does matter.

The primary criteria larger companies use to determine if an acquisition makes sense is EBITDA. These companies are usually looking for a minimum EBITDA of $1 million.

Why? The answer is simple — it takes just as much time to do a $1 million deal as it does to do a $25 million deal. Also, the professional fees involved in the acquisitions are similar (slightly higher for larger deals) regardless of the size of the deal. The percentage of fees decreases as the deal size increases.

For example, a $1 million deal may command fees and expenses of $50,000 or more (5% of the deal size), while a $25 million transaction may command fees of $150,000 to $300,000 (0.6% to 1.2%). This means that the percentage of fees and expenses decreases as the size of the transaction increases. Doing larger deals is, therefore, more cost-effective.

A company must invest in 25 businesses — each having a cash flow of at least $1 million per year — to have the same impact as buying a single company with an annual cash flow of $25 million. So, buying larger companies is more efficient, both from a cost and time perspective.

As always, there are always exceptions. In a recent M&A Talk Podcast, I interviewed the head of M&A at an $18 billion company that recently acquired a business for approximately $1 million.


When selling your business, first determine the type of buyer most likely to buy your business.

If your target buyer is an individual, then fishing will be the most practical strategy for selling your business.

If your target buyer is a company, then hunting will be the most practical strategy for selling your business.