Playing the COVID Bounce

There is a saying: “A crisis is a terrible thing to waste”.

The COVID pandemic has been a monumental crisis that has impacted our way of life and virtually every business.  Most business leaders have gone from anxiety to adrenalin rush, to frantically addressing never before seen challenges.  Many business leaders are now happy to have regained some normalcy and are perhaps a bit numb.

We are not yet out of the pandemic woods.  But increasing distribution of vaccines and acceptance of business and lifestyle practices that mitigate health risks are creating light at the end of the tunnel.

Some CEOs simply want and expect things to go back to “business as usual”.  Others are repairing companies that have been weakened financially, operationally or culturally by the pandemic.  If you have competitors who fit those profiles, opportunity may be knocking at your door.

Right now the time to capitalize on the expected post-pandemic economic bounce.

There are two paths to address specific opportunities COVID presents to your company:  Internal evolution driving organic growth, or external growth driven by acquisitions, joint ventures or partnerships.

It is a classic “Build or Buy” scenario.

Builders will have the advantage of tailoring an exact fit to their strategic needs. Resources can be allocated towards competency enhancing investments, including but not limited to:

  • Talent Acquisition: “Work from Anywhere” is a pre-pandemic trend that is accelerating. This creates opportunities recruit outside normal commuter geographies, with talent and fit overwhelming proximity as key drivers.  For companies in expensive metro areas where demand for talent is high and supply dear and expensive, recruiting remote workers in other regions has become a practical option.  For businesses in less populace geographies, recruiting high value remote workers outside their footprint is likewise a practical option.
  • External communication: Prior to the pandemic, video calls were a tool to be used judiciously. Now they are an accepted norm.  Your company requires technologies and training to execute on this evolving “business process”.  Client/customer exchanges are made more efficient, allowing your best client facing people and teams to interact more frequently with a greater number of accounts.   Business travel has been reduced and will be a source of continued savings.
  • Digital Customer Interaction: In-person B2B interactions are becoming increasingly digitized, fundamentally changing both the creation and implementation of “go to market” strategies.  Order lists, product availability, scheduling, exchange of documents and plans were all trending digital pre-pandemic, and those behaviors have accelerated.  Even more stark is the rapid acceptance of digital purchasing in the B2C sector.  This trend is over a decade old and is still picking up speed.  The pandemic has made it clear that consumers will engage in digital purchases even of products thought to necessitate in-person “touch” (perfume, candles, food products, furniture, etc.).  The extent of “Brick & Mortar Retail” disintermediation from the
  • Supply chain has yet to be seen; but retail real estate investors are clearly concerned. In either B2B or B2C interaction, business processes including but not limited to message crafting, customer acquisition, sales & marketing, and customer relationship management need to adapt both in terms of optimal skill sets and optimal business process platforms.
  • Reduced physical footprint: As a portion of employees work remotely part or full time, the need for office space will decrease, creating potential savings in physical plant.  Office space will need to adapt and be more flexible to meet those evolving needs.

Becoming “leading edge” in business processes might be considered primary targets for investment.

These might also be among the areas requiring a highly tailored tactical implementation of a company’s strategy.

Buyers may find opportunity in transactions involving wounded or distressed companies or assets.  A buyer can use their existing commercial platform to create operational leverage, significantly enhancing the performance of acquired assets or organizations.

Combined with efficiencies gained through business process evolutions described above, does this create an opportunity for your company to:

  • Acquire or merge with a competitor and materially rationalize staff and physical plant
  • Acquire or merge with a competitor and upgrade their business process through implementation of the acquirer
  • Acquire or merge with a direct competitor to drive increased market share
  • Acquire or merge with companies at rational values that are in adjacent markets or geographies
  • Seek any of the above in a manner that would scale your business to a point where its valuation is enhanced, access to financing increased and/or it becomes an attractive home to superior talent?

Driving growth through organic or external initiatives can both succeed.  The choice is case-specific.  The critical point is that if you and your company “lean into” where your industry is evolving, you have a competitive advantage over companies and executives who are just happy that the pandemic is receding, waiting for a return to the way things were, are still a bit numb and/or have seen their companies weakened by the pandemic.

It’s time for a “bias towards action”.

Maximizing Value in a Corporate Sale: Business Infrastructure

Is your company’s infrastructure adequate to support its current operations? Is it adequate to support your projected growth?

Your company’s infrastructure includes many things. Office, manufacturing and/or warehouse space; IT systems; purchasing and supply chain logistics; administrative functions; and more.

Potential buyers will view your company’s infrastructure as either mitigating or creating risk to your quality of earnings and growth potential.

If your company’s infrastructure is where it needs to be, the business will be more robust and able to take on challenges and growth opportunities. If it is fragile, and barely able to keep up with current operations, then the possibility that something will go wrong (whether or not you sell) skyrockets.

Inadequate infrastructure signals to prospective buyers that there is high risk to quality of earnings and potential for growth. Any prospective buyer will understand that they will have to develop and implement an investment plan to improve the basic assets of your company. This represents additional time and cost, and slows down a buyer’s post-acquisition plans.

Alternatively, having your company’s infrastructure primed, and ready to take on growth opportunities and industry challenges provides assurance to prospective buyers and mitigates their perception of risk.

Company infrastructure is an aspect of your business that you may take for granted; potential buyers won’t. Due diligence will unveil the adequacy of your company’s infrastructure and will be a factor in whether or not you are able to maximize value in a sale.

Maximizing Value in a Corporate Sale: Obsolescence

If obsolescence issues are present in your business, potential buyers will naturally understand there is increased risk for your quality of earnings and growth potential. One question any good buyer will ask is “are your products/services going to be obsolete in the next 3-5 years?” Smart buyers will not stop there.

With evolution in business accelerating, potential buyers will ask if your products/services will simply be less competitive in the near to mid-term. If they are, risk to quality of earnings and growth potential increases.

Most company’s products/services will not be obsolete in the next five years. Smart CEOs and owners make sure their company is always improving what they deliver to clients and customers.

The area many companies ignore in regard to obsolescence issues involve their business processes:

Are your revenue generation processes becoming obsolete? Sales, marketing, advertising?

Are your financial control and reporting functions keeping up with your company’s growth?

Are you employing financial and operational analytics and business intelligence tools that are becoming standard operational tools for strong businesses?

Is the management team that got your company to where it is the right one to get it to the next level?

Are the production methodologies used for your products/services at a current state of excellence?

The list goes on.

As you examine all aspects of your business, do so with an eye towards competitive analysis. That is what good potential buyers will do in due diligence. The more competitive your products, services and business processes, the greater the likelihood that your company will have high quality of earning and growth potential. Potential buyers will factor that into their valuation.

You can sell your company if there are weaknesses in regard to obsolescence. You will simply not maximize value.

Maximizing Value in a Corporate Sale: Quality of Strategic Plan

How potential buyers think your company will perform once they own it will determine their valuation.

Your strategic plan is the single best tool for explaining to potential buyers that your company has achieved its current performance due to thoughtful, calculated, well planned and implemented strategies. Your current strategic plan will show potential buyers that the same quality of analysis and thought provides them with a blueprint they can implement that maximizes the likelihood of continued success for your business.

If you don’t provide potential buyers a strategic plan that is clear and coherent, there will be an assumption that luck or you personally are wholly or largely responsible for what your company has achieved and what it might do in the future. Luck and your executive capabilities will be perceived as risk to your company’s future quality of earnings or growth potential under the ownership of a potential buyer.

Many companies small and large, do not have prior or current strategic plans that are clear, coherent and actionable.

All the thinking and information might be in your head, but if it is not written clearly and coherently, other people will not be able to understand it. If this describes your company, putting a plan together will pay off when you move to sell.

If your company does not have a quality strategic plan, it is important to hire an investment banker who will generate one for you. Having your “story” told in a way that potential buyers can understand, and which will stand up to the extreme scrutiny of due diligence, is critical to the process of allowing potential buyers an opportunity to understand why maximum value should be paid for your company.

If you don’t have a quality strategic plan, or an investment banker who can explain your business’s historical and going forward business strategy you can still sell your company. You simply will not get maximum value.