Why M&A is Challenging for SMEs: Key Obstacles Facing Small to Medium-Sized Businesses in the Food Industry
For many food industry business owners, whether you run a bakery, a family restaurant, or a food packaging company, selling your business is more than a transaction; it’s a life decision. After decades of nurturing a company, making a decision to sell can be overwhelming for business owners. The M&A process, with all its technical terms, complexities and everyone’s personal interests, can easily stall or derail a deal.
If you're a food business owner thinking of selling your company, understanding these 5 key challenges that you might encounter will help you throughout your M&A process.
1. Valuation Gaps: Aligning on Worth
The emotional connection to a business is deeply personal. You’ve poured in years of work, building not just revenue but also community relationships and reputation. Buyers, however, may only see financial metrics—revenue and profits—sometimes overlooking the intangible value that matters most to owners. This disconnect in expectations can lead to significant valuation gaps, frustrating both sides.
Mr Lee, who had run a local bakery with 7 outlets for over two decades, was shocked when an offer came in 40% below his expectations. “It’s like they didn’t see the love and loyalty of my customers and my hard work — just the numbers on paper.” These gaps often leave owners feeling unappreciated and undervalued.
2. Emotional Ties: Letting Go of Your Legacy
For family business owners and long-time operators, it’s not just about selling a company but letting go of a legacy. The pride, memories, and identity wrapped up in the business can make negotiations emotionally challenging, especially when the buyer’s vision doesn’t align with the owner’s legacy.
Mr Chan, who had built a high-end restaurant service from the ground up, felt disappointed when her buyer mentioned scaling down her luxury offerings to increase profit margins. The thought of her business changing direction was hard to process. “It was like they didn’t see what made us special,” she said, questioning whether she could truly let go and let the buyer carry on her brand.
3. Extended Due Diligence: A Drain on Time and Resources
For many, the thought of selling a business feels straightforward, but due diligence can be a lengthy process, dragging on for months on end. Most times, small SMEs do not have a finance team to help the business owners on top of their daily work. The time and focus required to pull years of records can disrupt day-to-day operations and weigh heavily on owners who used to just focus on their business.
Ms Tan, who owned a food ingredients manufacturing company, found herself overwhelmed by the requests for documentation. The constant demand for client contracts, supplier agreements, and certifications consumed her time, impacting her business’s output and leaving her exhausted. “It felt like my whole life was on hold just to gather papers,” she shared.
4. Miscommunication: The Pitfalls of Complex M&A Jargon
For first-time sellers, M&A can feel like a different language entirely, with legal, financial, and technical terms adding to the confusion. With multiple parties involved, even small misunderstandings can quickly compound, leading to frustration and mistrust.
Ms Lim, who owned a family chain of casual dining restaurants, found himself constantly re-explaining his intentions to his M&A advisors. Communication breakdowns, he realized, weren’t just causing delays—they were eroding his confidence in the process. “I felt like I was losing control of my own business.”
5. Operational Impact: Balancing Sale Preparation with Business Needs
Selling a business requires more focus and time than most realize. For many owners, it is their first time selling a business. It becomes a balancing act, juggling sale preparations with daily responsibilities. This shift in focus can be overwhelming and hurt both business performance and personal well-being.
Mr Tan, a distributor of packaged foods, began noticing that client deadlines were slipping as he focused on the sale of his company. “It felt like I was being stretched thin, trying to keep my business running while also preparing to say goodbye to it.”
Conclusion
Selling a business is seldom a simple transaction.
It’s a journey that brings up both visible and hidden challenges that touch nearly every aspect of an owner’s life. These stories show that the M&A process requires careful consideration, preparation, and emotional resilience.
For owners, acknowledging these potential obstacles is the first step toward successfully navigating an M&A journey and protecting both their business and their peace of mind.