As we talk with company owners we are consistently asked the same two questions:
- What is the best way to maximize value?
- What is the best time to pursue a transaction?
Before answering these two questions, we recommend a “Strategic Alternatives Tune-Up”, which is a fairly easy and confidential exercise.
We believe that each company is unique and all owners have varying strategic and financial objectives. It is very important to fully understand both the financials of the company and objectives of its owners to determine all the alternatives available and the best potential timing of each.
A Strategic Alternatives “Tune-Up” includes the following key items:
- assessment of the owners’ goals and objectives, including growth, liquidity, ownership, employees, control, etc.;
- initial due diligence review of financials and operations, including key areas of opportunity and risk (customers, contracts, competition, etc.); and
- analysis of the relevant industry and capital markets environment.
Many business owners are surprised to learn that multiple options may exist to achieve their liquidity or growth objectives. In some cases, the best option may be “maintain status quo” or “do nothing” once the alternatives are fully assessed.
The following illustrates the range of options we analyze and assess:
Once the viable alternatives are determined and relative pro’s and con’s are assessed, the best and most appropriate path can be pursued.
To the extent a transaction or new capitalization is desired, determining when to pursue a transaction requires a lot of thought and consideration. We consider the following in regards to timing:
- It can take up to 30-90 days to “get ready” for a transaction, so we recommend preparing early and thoroughly to ensure you have the option to do something when and if the terms and fit are appropriate; there is always the option to slow a process down, but it is difficult to speed a process up.
- Weighing benefits of maintaining the future upside and associated risk vs. the benefits of risk and wealth diversification, liquidity, and potentially a partner to help grow the business.
- Incorporating any timing catalyst such as an acquisition, a refinancing opportunity, a liquidity need or desire or a strategic growth investment, generational or succession planning.
- Industry or environmental factors impacting growth opportunities or constriction, including legislative, interest rates, competitive and other factors.
- Confidentiality is an important priority to minimize business disruption in all situations that are not publicly disclosed. The approach to potential third parties needs to be tailored to the relevant strategy. For example, a limited process or “market check” versus a full blown auction may be sufficient to provide the best mix of valuation, structure, and timing. This approach can also expedite the process and limit the potential impact to your business.
Please contact us to get your “Strategic Alternatives Tune-Up” and determine what options may be the best for you and your company.