ok here are some basics:
Why is the owner selling?
- retiement
- growing and cannot afford the expansion costs
- tired of running the show and wants to be a tech with someone else having the business headaches
Why is the Buyer buying
- desire to be in the business space (first time lab buyers)
- expand market share or geography of a current lab business
- Capture key assets (IP, specific techs, systems)
These two have to be aligned, the right buyer for one lab is not the right buyer for another, and preparation needs to be made BEFORE an owner wants to put their lab on the market. It's NOT just calling around or hiring a consultant. proper sale of a business is something that should be prepared for at least 3 years in advance of an anticipated sale. Failing to do this drops the sale price considerably!
There are two very different animals as a buyer or a seller:
the 1-15 person lab
(note, 10 years ago this category might have been the 1-5 person lab, but average lab size has gone up dramatically - primarily because so many small labs have closed and technology makes scaling a lab easier than in the past.)
The value of this lab is the owner and a succession plan. If the owner still manages the primary customer relationships then it is expected that more than half the clients will leave when the owner does. Therefore it tends to be an asset purchase or tiny multiple like 1-3x EBITDA.
If the owner is a more passive participant, perhaps a technician that has a strong business manager and the owner likes to sit at the bench but not run the business, that improves the value, if they have good systems that also improves. Although the assumption is that if their systems are good they would not still be in this size category...soo there needs to be a story there....
If they have a strong number 2 & 3 employee who are remaining with the business and capable of running it after the owner leaves that can help.
Buyers of this kind of lab fall into 2 categories: large groups looking to fold the lab assets/clients into their own operations, and small investors who think they can buy a lab and run it better.
One of the most likely examples would be a local medium lab that wants to grow and would rather buy the business than spend the time marketing. So if you want to sell a solid 1 million dollar lab, the first place I would go is to talk to the local 4-10 million dollar labs.
Large groups without a local presence and venture capital firms will not touch a lab in this size category unless there is a very specific reason, usually they are buying 3-5 of them and putting them together to take over a small geography, as DSG has done in recent years.
next, the medium to large lab. more to come....