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Want to Increase your Company’s Enterprise Value?

We all know that growing revenue, profit, and cash flow are incredibly important for determining valuation. But if you are thinking of selling your company this year, there are other assets beyond your bottom line that are just as important to potential acquirers that you may be overlooking.

To make yourself attractive in today’s booming M&A market, consider highlighting these additional value drivers as part of your exit strategy:

  • Your unique customer segment.  Do you have a unique niche or special customer base that another company may need to supplement their growth? Perhaps you have a database or email list of a specific target demographic that isn’t easy to come by. Acquirers may benefit from purchasing your business to gain access to a coveted group or segment they otherwise wouldn’t have access to. Don’t overlook what might be right under your nose.
  • Your unique value proposition. Have you cornered a niche or very specific offering that is different from what your peers are providing? Do you have a moat around a specific vertical or area that would be considered a true differentiator? Buyers are looking more and more for entry into a market they don’t already have. But be sure that what you have is truly unique. It’s important to first prove to yourself that your offering fills a specific need or niche before proving it to a potential acquirer.
  • Your IPs or patents. Do you have intellectual property rights preventing anyone from recreating a specific technology, tool, or product offering? Sometimes companies have something of value that they don’t even realize. Internal processes, data on client results/outcomes, demographic customer insights can be valuable IP, even if not patented or patentable. What you may not consider IP or differentiated could be incredibly important to someone else. It is often more cost-effective for acquirers to simply purchase a company and their IP instead of trying to recreate something similar on their own.
  • Your back-office technology and systems. Do you have proprietary technology, like AI, ML, or other back-office systems that enable you to operate more efficiently and would be difficult for another company to recreate? It is not uncommon for companies to purchase other companies simply because they have a more effective and cost-saving solution.  Efficiencies increase profitability and can be just as valuable as direct revenue drivers or patents.
  • Your client list. For those in the professional service business – do you have a list of clients that you work with, sell to, or partner with that would continue to do so after an acquisition? This list can be extremely attractive to potential M&A suitors. Not having to spend the money acquiring new customers or new clients is a big win for any investor. Also to note, if you are able to take on blue-chip clients, even if they aren’t always the most profitable, you will enhance your value significantly in the eyes of buyers. Big names and “sexy” clients can be very attractive to certain companies looking to enhance their growth strategy.
  • Your team. Do you have specialists or members of your leadership team (including you!) with unique skills that another company may need to supplement their staffing gaps? As you know by now, the great resignation is encouraging companies to look for talent in new places. Play up the strong suits of your people to signal to acquirers that you have something they don’t. A good tip is to consider a multi-year plan to incentivize key employees to stay post-sale to ensure the deal is a successful one. It is also a benefit to showcase consistency and stability in leadership. If your C-suite has been together for three or more years, that can signal to buyers that you have a solid team with the ability to strategically drive future growth.
  • Your data. Beyond just your customer list or database, do you have unique or proprietary research, data, or crucial information about a market, a segment, or an industry that another company may need to help them further expand their own offering? Securing information, especially today when privacy concerns abound, can become quite difficult and costly – so being able to absorb existing data can be of interest to potential acquirers.
  • Your partnerships. Do you have relationships with vendors or partners that you’ve established over the lifetime of your business? Many companies looking to acquire will not just want to buy you and your offerings, but your relationships. Buyers will look to absorb these existing relationships to help them further their own objectives and expand their reach.
  • Your brand recognition & reputation. Does your brand name signify something unique or important in the marketplace? Perhaps it’s synonymous with quality or great service. Do you have a reputation for being the best at what you do? Do you have a brand loyal customer base? How your brand is perceived is incredibly important to M&A suitors as they assess the value of a company. It can be very difficult to build trust, especially in today’s tumultuous landscape, and those that do so successfully can use it to their advantage by offering that up as a benefit to potential acquirers who may be struggling in this area.
  • Your supply chain. Do you have a streamlined supply chain that allows for more seamless customer order fulfillment or smarter sourcing? We are seeing acquirers who are struggling with supply chain management absorbing companies that are a part of their existing logistics as a way to eliminate unnecessary steps, and ultimately get their product into customers’ hands faster and cheaper.
  • Future Growth Strategy. Do you have a strong strategic plan and/or an innovative growth strategy that shows an exponential future trajectory? Buyers will often look for companies that have a strategic vision that can help them dominate a particular vertical or corner a market they don’t already have access to, all while still assuring that the business will continue to succeed.  Having a well-thought-out written plan in place for how you will execute on growing and scaling your business will ultimately help reduce the acquirers’ perception of risk. It will also provide them with a roadmap for how to expand into new territories they aren’t already familiar with.

To sum up, when trying to attract acquirers, remember to emphasize your strengths! Your appeal is much more than just your revenue, gross margin, and profit. More often than you may realize, it’s about your business having something of real or perceived value that potential M&A buyers do not.  Identify what that is and how best to package it and highlight it. This robust M&A strategy will ensure you put yourself in the best possible position to create options for yourself that can help you achieve the outcomes you desire.


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