Recently Firmex, a global provider of virtual data rooms and a secure document sharing platform, and Mergermarket, an independent, mergers & acquisitions proprietary intelligence tool, co-hosted a roundtable discussion focusing on current M&A conditions. Their point was that no matter what cycle the market is in, deals still close and according to one panelist, preparation is the key:
Mary Ann Travers, Principal, Crowe Horwath: Private company sellers need to make sure they’re putting their best foot forward. Part of that entails analyzing their operating expense bases and preparing financial statements that reflect their company’s operations in a favorable light. They should remove non-operating expenses; identify off-balance-sheet items; and make sure that their headcount is optimal, although not too lean, since they want to achieve their forecasts. When preparing their forecasts, they should make sure that they’re capturing growth opportunities and that they have supporting documentation to back up their assumptions.
Truer words have never been spoken. And what Travers is referring to is the process Generational Equity calls its evaluation; we conduct one of these on every client before we take them to market and we do this for two primary reasons:
The BEV is vital because every business owner should have an idea of the baseline value for their firm before approaching buyers. If sellers have no idea of the value of the company, how can they know which offers to take/reject/ignore/pursue? Realistically they can’t, so before we enter the market, we determine the BEV, which then leads us to point No. 2 above: Strategies which we call The Roadmap for Enhancing Value (REV). These are ideas/strategies that owners can implement even while in market that will enhance the company’s value and/or improve its sale-ability. This is how another participant of the roundtable describes the idea:
Jeff Cleveland, Managing Director, D.A. Davidson: We counsel all of our clients to take deliberate steps to properly prepare in advance of a transaction in order to optimize results ... areas of focus tend to include business operations, customer and supplier relationships, market dynamics and growth opportunities, and facilities and equipment. Assessing and adjusting a business around these key areas can facilitate meaningful value creation by the time shareholders execute a sale. Fundamentally, this sort of preparation is simply about building a better business for the long-term. Investors will take note of these sorts of improvements, above most things.
Cleveland makes a great point at the end of his discussion on value improvement: Buyers will take note of the steps you are taking, even if the final goal of the strategic improvement has not been reached.
This is really important for business owners to comprehend. Too often entrepreneurs delay operational improvements assuming they are not worth the effort. But buyers see these moves in a much more positive light and will often be pleased to see efforts being implemented while negotiating with sellers. Typically it is the overcoming of inertia in business improvement that is the most critical to buyers.
As both Travers and Cleveland point out, savvy, well prepared business owners that take steps today to make their businesses more attractive, healthy, vibrant, and operationally effective will reap the benefits of any market cycle.
Businesses are sold every day, in all market environments; if you would like to learn more about how you can prepare yours to participate, attending a Generational Equity exit planning seminar is a great first step. An investment of a few hours of your time could richly pay off in the long term as you learn from our M&A professionals about how to think like a buyer when preparing your company for sale. To learn more, follow these links:
Carl Doerksen is the Director of Corporate Development at Generational Equity, part of the Generational Group.
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We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
Dear Chris and Andre, I just wanted to say thanks for all your help. Even though this process was not an easy one, it was comforting to know that I had a capable team standing beside me. You made me feel like we were almost your only client or at least the most important one. Thanks again, and I will recommend your service in the future.Shenille Engelhart, Owner – CLS Technology
T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.Bryan D. Horn, Owner, Over Under Clothing
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.Robert Evans, President and CEO of Mealtracker Dietary Software
Tom Staszak is one of the most professional people I have dealt with in my last forty years of business. You’ve got a great group of people and you have built a truly professional organization.Michael J Polarek, President, Paragon Packaging
I am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!Eric Erlandson, Owner, Action Fastenings, Inc.
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.Robert Evans, President and CEO of Mealtracker Dietary Software
We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.Karen S. Williams, CFO, BW Manufacturing
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.Terry D. Wickman, President, Keytroller
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.Larry Moore, Owner, A Company Portable Restrooms
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.Andy Graham, Vice President, Modern Heating & Plumbing
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”Karen S. Williams, CFO, BW Manufacturing
Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!Andy Graham, Vice President, Modern Heating & Plumbing
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.Pete L.
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.Jay Dinnison, Owner of Sharpe Mixers
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
We are extremely pleased with the way Generational Equity handled the sale of our company. Your associates, Tom and Chris, did an outstanding job of getting us (me) through the process.Michael J Polarek, President, Paragon Packaging
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Terry D. Wickman, President, Keytroller
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.Jay Dinnison, Owner of Sharpe Mixers
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
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