Do you sit in your office asking yourself, how do I sell my company? I could do it myself, right? You could…but why would you?
- Avoids seller statements that a buyer may view as self-serving by providing a professional, credible presentation of the facts.
- A professional vets the buyer early in the sale process. This determines what attributes they want to present to the seller that appeal to the buyer’s interest.
- A professional knows the benefit of confidentiality. They know how to maintain it, and how it plays an active role in adding value to a company.
- They can typically secure two or more times the amount of their success fee in added value for the seller.
In addition to the business’s ability to produce free cash flow. Companies physical assets, including the plant, equipment and inventory also must be valued in the context of their useful life. The company’s workforce or human capital is another source of value. Efficient companies are always rewarded with higher valuations while inefficient businesses are penalized. Some assets are not easily valued by traditional methods. Companies intellectual assets include goodwill, a superior roster of customers, and undervalued or underutilized assets.
However, these factors have a direct impact on value. They help determine the company’s competitive position in the current and future marketplace. By collaborating with an experienced banker, business issues like competitiveness and value of intellectual property can be made into positives. These in turn, drive value. This also means that the way the company is presented and marketed to the acquisition community will also influence the value that will be obtained in a sale. The question of how best to position the company in the market and describe its value drivers in the offering documents is a critical step. It will determine and access a target audience for the company.
Value Drivers include:
- A diverse customer base
- Unique products or services
- Intellectual property
- Exclusive distribution rights or dedicated distribution channels
- Limited competition
- A strong management team in place
- Supportable growth options
- A strong brand.
Not only is it crucial to identify all value drivers, but it is even more imperative to effectively communicate their value to investors. For example, some value drivers may not be maximized, such as a new product that has not yet reached its full potential.
Investment bankers who have experience identifying these strengths, therefore, will be able to capitalize on their significant value by presenting them in a manner that reflects their actual and potential contribution to the company’s success. “In this instance a negative for the owner/seller can turn into a positive for the potential buyer, enabling the acquirer to offer more money or better terms.”
Moreover, it is one thing to identify value drivers; however, assessing their worth is another crucial aspect. A banker that specializes in increasing transaction values through disciplined analysis will not only have a portfolio of past successes but also concrete evidence of how their assessment of underperforming or underdeveloped business value drivers were used to obtain a higher price.
The bottom line is that, ultimately, in any corporate finance transaction, an experienced, professional investment banking firm can provide a broad range of services. Moreover, these services collectively serve to ensure a smooth transaction that produces the best outcome. By working with management, a banker can create a compelling presentation that highlights the company’s investment attributes in a manner that maximizes the value the seller receives.