Business buyers in the UK: the five types.
There are five types of business buyer in the UK: trade buyers, private equity, management buyouts, direct or partnership buyers, and whoever responds to a broker listing. They pay differently, they treat your brand and your team differently, and they are not interchangeable. Choosing which type to approach is a bigger decision than negotiating with whichever one turns up.
Written by Lee Antony Smith, a direct buyer. 32 M&A transactions over 12 years, 5 trading companies still owned.
They do not want the same thing, and they do not pay the same way.
The headline number is the least reliable way to compare them. What separates these five is what happens after completion: whether the brand survives, whether your team survives, whether you are still involved, and how much of the price is actually cash on the day.
| Type of buyer | Who they are | The advantage | The catch |
|---|---|---|---|
| Trade buyer | A competitor, or a company in your supply chain | Often the highest headline price | Your brand and team are usually absorbed |
| Private equity | A fund buying towards a three to five year exit | Institutional money, and speed | Full control, and the owner is typically out |
| Management buyout | Your own team buying the business from you | Continuity, and a known quantity | They rarely have the funding without help |
| Direct or partnership buyer | A private buyer using its own capital | No commission, brand and team kept, a stake retained | A smaller universe of genuine buyers |
| Broker-sourced buyer | Whoever responds to the listing | The widest reach | Around 2% of listed businesses complete a sale |
I am the fourth row. I buy directly with my own capital, take no commission because I am not introducing anybody, keep the brand and the team, and in most deals the owner retains a stake and stays involved. That is not the right answer for everybody, and the honest catch is in the table: the universe of genuine direct buyers in any one sector is small, which is why finding them is a targeted exercise rather than a listing.
A high offer and a high outcome are different things.
A trade buyer can usually justify the biggest headline figure, because removing duplicated overhead makes your business worth more inside theirs. That figure is a starting position, not a payment.
- Broker commission comes out of the proceeds, and it comes out of your side
- Deferred elements move money into years two and three, where it is at risk
- Earn-out conditions frequently depend on costs you no longer control
- Warranty and indemnity exposure can follow you for years after completion
- A retention or escrow holds back part of the price against future claims
Once those are taken off, a lower headline from a direct buyer with a clean structure frequently pays more in cash actually received. Compare what lands in your account and when, never the number on the front of the offer letter.
Five things every serious buyer discounts for.
These are what a buyer looks at before they look at anything else, and all five take twelve to twenty-four months to put right. That is the entire reason to have a conversation long before you intend to sell.
- Clean, timely management accounts. Nothing kills a price faster than numbers a buyer cannot trust
- Revenue that is contracted or recurring rather than won again every quarter
- No single customer above roughly a quarter of turnover
- A management layer that will still be there the day after completion
- A business that runs when you are not in it, which is the single largest driver of the multiple
The last one moves the multiple more than the other four combined. A business that runs without the owner in it is a business a buyer can price with confidence. A business where every quote, problem and key relationship routes through one person is a business they price for the risk of that person leaving, which is exactly what is about to happen.
How to judge a buyer, not just an offer.
You would be handing over something you built over decades. These are the things worth asking about on the first call, long before anybody talks about price.
I keep the brand and the name over the door. What you built carries on being recognisably yours instead of disappearing into someone else’s letterhead.
Retention runs around 85% across partnership deals, against roughly 40% in straight buyouts. Your team is a large part of what I am buying.
If the fit is not there you will hear it on the first call, not after three months of diligence. I would rather lose a deal fast than waste a year of your life.
No listing, no teaser, no broker circulating your numbers. Nothing reaches your team, customers or competitors until you decide it should.
I am not a flipper. I hold, invest and build, and I reward the teams who get me there. Year five is discussed before anything is signed in year one.
Because you usually keep a stake, we both win in the same direction. That single fact changes every conversation after completion.
Around 2% of listed businesses actually sell.
A broker lists your business and introduces you to buyers for a percentage of the price. That is a legitimate service and it works for some owners. It also means a marketing period, a teaser document circulating, and a year finding out whether anybody who enquired was serious, with roughly one in sixteen businesses selling inside twelve months.
Approaching buyers directly in your own sector removes the commission and most of the waiting. They understand the numbers already, they move faster, and nothing is circulated. If you own an established UK HVAC, Renewable Energy or Construction business, I am one of them. If you are in another sector, still ask. I have partners across multiple industries and we look at businesses outside those three regularly.
Business buyers: the questions owners ask.
What types of business buyer are there in the UK?
Five, in practice. Trade buyers, meaning competitors or companies in your supply chain. Private equity, buying towards an exit in three to five years. A management buyout by your own team. Direct or partnership buyers, who are private and use their own capital. And whoever happens to answer a broker listing. They pay differently, they treat your team differently, and they are not interchangeable.
Which type of buyer pays the most?
A trade buyer often quotes the highest headline number, because they can justify it through synergies such as removing duplicated overhead. That headline is not the same as what you keep. Once deferred elements, earn-out conditions, warranty exposure and broker commission are taken off, a lower headline from a direct buyer with a cleaner structure frequently pays more in cash actually received.
How do I find a buyer for my business without a broker?
Directly, which is how most good deals are done. Approach the buyers who already operate in your sector, because they understand the numbers and move faster. A broker lists your business and introduces you for a percentage of the price, and around 2% of listed businesses complete a sale. Going direct means no commission out of your proceeds and no marketing period spent finding out whether anybody is serious.
How do I attract the right buyer rather than any buyer?
By fixing the five things a buyer discounts for, ideally twelve to twenty-four months before you sell. Clean, timely management accounts. Contracted or recurring revenue. No customer above roughly a quarter of turnover. A management layer that survives completion. And a business that runs without you in it, which moves the multiple more than anything else on the list.
What does a business buyer look for first?
Whether the profit is real and whether it survives your departure. Everything else follows from those two. That means adjusted, sustainable earnings rather than turnover, the quality of the revenue behind them, customer concentration, and how much of the business walks out of the door with you. Two companies with identical profit can be worth very different numbers on those factors alone.
Should I sell to a competitor?
It can be the right answer, but go in with your eyes open. A competitor can pay well and understands the business immediately. They are also the party most likely to absorb the brand, merge the team into their own, and learn everything about your operation during diligence whether or not the deal completes. If your name and your people matter to you, weigh that against the headline number properly.
Valuation, timing, confidentiality and what happens to your team are covered in full on the selling page.
Want to know what a real buyer would say?
Tell me roughly where the business is and I will come back with a straight view on what it is worth, which type of buyer suits it, and what would move the number before you go anywhere near a process. No obligation and nothing reaches your team.
Prefer to talk now? Call 020 3475 5475 or email lee@verdanicapital.co.uk.
The right buyer is chosen, not found.
Owners who end up happy with the outcome almost always decided what kind of buyer they wanted first, then went looking. The ones who regret it took whoever the listing produced.
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