Are you thinking about selling your company?
Be warned – the process always comes with some degree of stress and uneasiness. But, the quickest way to mitigate those feelings is by hiring an M&A advisor. You may be hesitant to spend the money when you’re focused on bringing in profits from a sale, but outside help from an experienced professional can provide the confidence you need to navigate the negotiation process and generate the sale price you deserve for your business.
Keep in mind that the value of an advisor isn’t just in their ability to sell your company; it’s in their expert knowledge of the steps that take place before the sale that will bring you the most benefit. Here are three specific ways that an advisor can help:
Identifying Weak Links
Perspective is everything when it comes to a sale – on both sides of the relationship. While you need a prospective buyer to have a high opinion of your company in order to gain their interest, you can’t achieve that if you don’t stop and consider your own – perhaps clouded – opinion of your company. All business owners or CEOs have blind spots when it comes to certain areas of their business – that’s the way it is and will always be. But the weaknesses that you don’t see – and could otherwise mitigate – could lead to lower valuations. An advisor brings a fresh, unbiased point of view that you need to truly evaluate the state of your business and execute an action plan to eliminate any potential causes for concern before going to market.
Increasing Cash Flow
Again, perspective matters! After years of running a company a certain way, it’s easy to fall into patterns and difficult to implement change. An advisor will give you the necessary push to break you out of the comfort zone and make the hard decisions that will increase your productivity and have a quantifiable impact on your sales cycle, amplifying your cash flow gains.
Whipping Financials into Shape
Finally, advisors help you to take a step back and analyze your company’s true financial value. This requires more effort than you may think – it’s more than a matter of printing out recent revenue and growth documents. Yes, you need to be able to effectively demonstrate the key drivers of your profits, but you also need to provide a look into the future. Depending on how precise your record keeping has been over the years, compiling this type of presentation can take a considerable amount of time. An advisor can take the lead and ensure that the data you’ve been gathering provides the most convincing insight for your prospective buyers.
If you’re considering selling your company and hiring an advisor, it’s in your best interest to get started as early as possible. The more time you have with an advisor, the more value that advisor can add to your hopeful sale. Here at Symmetrical, we are committed to helping your company secure the best deal it can. If you are considering selling your business and need professional help, contact us today.
Over the past several years, private equity firms have been increasingly interested in investing in add-on acquisitions, rather than platform companies. While the current economy has solid footing, more businesses are returning to the mergers and acquisitions marketplace. This opens the door for acquiring new platforms and broader possibilities for supporting add-ons.
What are Platform Companies?
Platform investments are companies that a private equity group (PEG) can view as a starting point for more acquisitions, or add-ons, to follow in the future. Normally, new platforms include companies in high-growth industries that are commanding a significant market share. Platforms are generally of sufficient size and have the capability to acquire and support add-ons. Often, these platforms are reasonably capitalized and have broad market exposure, although are usually limited to one industry. When sold, platform investment companies are sold at premium price.
What are Add-ons?
On the other hand, add-on companies are not normally viewed as industry leaders. These companies are more prone to suffer issues with management, undercapitalization, and lack of exposure in their industry. Add-ons are marketed by boutique investments banks or small companies to be sold to larger platforms. Estimates can vary, but add-ons constitute about 40-50% of private equity buyout activity. Generally, add-ons provide complimentary services, technology, or expansion to larger platforms. Depending on the industry, add-on companies may be considered competitors to the original platform company, yet they are added with the goal of increasing overall revenues and earnings.
“Buy and Build” Strategy
While both new platforms and add-ons serve separate purposes, using them together can create maximum profits. The “buy and build” strategy is normally employed by private equity groups to increase their returns and generate value. This strategy entails buying a new platform company, with its already established management systems, and leveraging it to acquire subsequent add-on acquisitions. To successfully transition through this strategy, private equity firms must have significant experience in platform management, as this process requires serious change. The “buy and build” strategy is most commonly deployed in a slower economy as a way to improve returns. These strategies can become challenging as it takes time to properly acquire and integrate several companies together.
At Symmetrical Investments, our main focus is to maximize value. If you have questions or are interested in these types of investment, contact us to learn more.