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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.

 

Maximizing Value in a Corporate Sale: Introduction

You are a CEO. You lead a successful business you share numerous qualities with your peers. Among them, being somewhere between bright and “whip-smart”. You turn ideas into reality. Your leadership has a direct impact on your company.

Selling your company will be one of the most important financial events in your life. Maximizing value in that sale is critical to all stakeholders.

You approach me as an investment banker who sells companies and ask “What’s my multiple of – EBITDA or Revenue or Book Value?” How do I get maximum value when I sell? What are you going to do?

Some M&A professionals, your lawyer or accountant would gladly answer those questions.

BUT …. you are taking the wrong approach to maximizing the value of your company in a sale.

The same characteristics that make you a successful CEO will allow you to maximize value in the sale of your company.

As your investment banker, my job is to present your company’s value proposition to appropriate potential buyers in a clear, compelling, accurate manner. This will allow them to perceive its value. From that perception, we can negotiate price and terms. Accuracy is critical: You must assume EVERYTHING will come out in due diligence. If any representations are proven false in due diligence, or material omissions arise, you will undermine credibility on every aspect of negotiations.

This series of articles will demystify the process of maximizing value in the sale of your business and explain how you, as owner and/or CEO, control that outcome.

 

The premise of these articles is that two things determine the value of a business:

  • Quality of Earnings – Is profitability from your core business sustainable?
  • Growth Potential – Whether your market or industry are growing, static, or shrinking, does your company have the ability to grow at an above-average rate; are you better than mediocre.

The next six installments of this series will discuss the most import factors in maximizing the value of your company by creating upside or risk to your company’s quality of earnings and growth potential:

  • Quality of Management
  • Quality of Strategic Planning
  • Business Concentration Issues
  • Obsolescence
  • Business Infrastructure
  • Financial capacity, controls & reporting

All of these factors are controlled by you as owner and CEO.

Tune in in two weeks for our next segment.