Planning for Acquisition: Maximizing Value

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Planning for Acquisition: Maximizing Value

Structure management and operations to be prepared for acquisitions and you’ll create a business that can grow itself inorganically.

WHY ACQUISITION PLANNING?

In the overwhelming majority of cases, middle-market business owners run their businesses the way they run their households. They are the linchpin of success, driving innovation, opportunity and growth by their personal, often Herculean, efforts. Ironically, it these same owner/operators who tend to be the value-limiting factor of the business. When a business cannot function without its owner, its value is diminished in the eyes of a prospective buyer. A strong acquisition plan will identify other leaders within the company—your “diamonds in the rough”—and convert them into major assets for your organization.

WHAT IS VALUE ACQUISITION PLANNING?

Value Acquisition Planning is a strategic process that empowers buyers to view a business as an investor would—enabling you to identify and correct factors that limit value. Owner/operators are typically concerned only with making their businesses stable rather than valuable. That is a mistake. I’ll let you in on a secret that you already know on some level … you can run their business better they can.

Every business has key value indicators. These value indicators are items a buyer would want—things like a mature management team, appropriate business metrics, established processes, thorough documentation, organization by departments, strong contract vehicles and a healthy backlog of work. Targets that have some but not all of these qualities may be undervalued, and that’s what most owner/operators never consider. A stronger, more mature organization can identify and remedy the value-limiting factors during transition, immediately increasing value.

JUST ANOTHER GROWTH PLAN?

Value Acquisition Planning is very different from a growth plan. Most plans tend to be short-term, focused on sales goals and penetration of the market, rather than position in the market or operational capability. This is often the result of an unclear understanding or consideration of the role inorganic growth can play. [I think we need a definition of inorganic growth and why it’s different than organic.]

Instead, it’s best to review growth goals and then assess what portion of this growth can reasonably be achieved inorganically at a low risk. From here, you have new targets for inorganic and organic growth, enabling you to consider a more aggressive ascent.

There is an old business saying, “If you don’t know where you are going, any road will get you there.” The ideal path from A to B can only be determined when A and B are clear, specific and objective. Through the Value Acquisition Planning processes, we will help you identify your long-term growth end-points. Working backward, we can determine the acquisition route easily. With an end-point in mind, your business journey has a destination, rather than perpetual directionless motion.

WHAT IS THE PROCESS? 

First, we analyze your business to determine its financial and strategic value, and then we identify aspects of the business that are limiting its value. While each business is unique, the process often includes reviewing your appropriate business plans, strategic plans, marketing plans and operating documents. Once we know your strengths and weaknesses, we develop a target profile for companies that would be complementary to your firm that would benefit from purchase your business. Finally, we will jointly develop metrics to gauge our success … and your value.

The goal is to bring disciplined acquisition and transition practices to bear in your business—those you might find governing a $100 million public company:

  • Are you properly positioned in the market with a clear niche?
  • What type of acquisition could strengthen your position?
  • Do you have the right transition team in place?
  • Is your acquirer’s structure right for your goals?
  • Can strategic value be achieved beyond the financial value?
  • Can you capture intellectual property, contract vehicles or other intangibles?

With the right people, processes and structure in place, you have more options than you ever thought possible. When it comes time to execute the transition of your acquirer, you’ll be able to extract a much higher value from the transaction.

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