Today we conclude our three-part series examining key steps to build a buyer ready business. The series is based on a study conducted by the Cass Business School of the City University London and Intralinks. The folks at Cass and Intralinks analyzed 23 years of acquisitions and examined a global sample of 33,952 public and private companies in the process of their research.
Their in-depth examination revealed, as we have learned over the years, that there are a number of key steps business owners can take to enhance their company valuations and eventual salability. Our recommendations are contained in a document we call the Roadmap for Enhancing Value (REV), which we provide to every client at the conclusion of our business evaluation. It examines a few dozen key areas that typically buyers are concerned about and that business owners can address in order to build a buyer ready business.
Also known as “off-balance sheet assets,” these are items that specific buyers will find attractive about your company, and their attractiveness will vary from buyer to buyer. This is how the study describes these features:
Many of our survey respondents point to intangibles such as brand value, the capabilities of management, legal and regulatory compliance, social responsibility, risk management and reputation – with culture often being mentioned, as a key factor in business growth.
Looking at this list above, folks with an MBA in finance will correctly point out that these are impossible to truly value. What is the dollar value of a company that meets all compliance standards in an industry? What intrinsic value does a firm’s reputation have? Well, we only need to look at the debacle that Wells Fargo now faces to understand that although these items may not be listed on the balance sheet, they have a huge impact on the valuation of any business.
Here are some keen insights from professional buyers surveyed by Cass/Intralinks:
“We look at the value and the name the company has made for itself in a particular region,” says the head of M&A and strategic investment at a Singaporean public company. “We believe in sustainable growth and have been focusing on companies that have been a part of it. But we also look at the way business is carried out and the culture within the company.”
“The target’s culture is very important. Having a clear understanding of the target’s culture will reveal several insights, making it easy for the acquirer’s management to take control and introduce new growth methods to help the business grow at a faster rate, benefiting all the people involved in this operation from the management right up to the employees,” says a partner at a UK PE firm.
Culture is just one of the many intangibles that buyers examine closely when making an acquisition. In our first article in this series we focused on top line growth being a key issue. The second piece honed in on profit margins and the bottom line as being equally valuable to buyers. However, based on our work with buyers, assuming that revenue and profit trends are positive, intangibles often will become a key determinant affecting not only deal value, but structure as well.
Here is a short list of some intangibles you may have in your business that you may not even be aware of having “value”:
Now this list does not apply to every industry and in fact, in some industries, you will find some very specific intangibles that buyers look for. What you need to do before you approach any buyers with your opportunity is to brainstorm your company’s intangible assets. Have you ever done this? It is an exercise I would encourage you to do. You might be surprised at how long your list may be. And the reality is this list will determine how you approach buyers, items you will highlight in your marketing materials, and features you will focus on when negotiating.
Interested in learning more about how buyers “value” intangibles? Attending a Generational Equity M&A workshop is a good place to start. A few hours invested in this meeting will help you generate a long list of possible intangible assets that exist in your business. To learn more, call us at 877-213-1792 or visit our website to learn when we will be in your area next.
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2016 Generational Equity, LLC. All Rights Reserved.
The information we learn from customers helps us personalize and continually improve your experience at gencm.com. Here are the types of information we gather.
Information You Give Us: We receive and store any information you enter on our Web site or give us in any other way. We do not sell or rent your personal information to others without your consent. We use the information we collect only for the purposes sending promotional information, enhancing the operation of our site, serving advertisements, for statistical purposes and to administer our systems. We DO NOT use third parties to provide customer service, to serve site content, to serve the advertisements you see on our site, to conduct surveys, to help administer promotional emails, or to administer drawings or contests, but reserve the right to do so in the future without advance notice. Our computer system protects personal information using advanced firewall technology.
Information from Other Sources: For reasons such as improving personalization of our service, we might receive information about you from other sources and add it to our account information.
Generational Capital Markets LLC may license the use of its intellectual property including but not limited to its name, likeness, and logo for the use of affiliated offices. Such affiliated offices may not be owned, controlled, managed, supervised or staffed by employees, officers, or agents of Generational Capital Markets, L.L.C. Affiliated offices may be independently owned and operated. For more information about a particular office, please contact Generational Capital Markets LLC at is office in Dallas, Texas.
This page may contain other proprietary notices and copyright information, the terms of which must be observed and followed.
INFORMATION ON THIS WEB SITE IS PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT. SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION OF IMPLIED WARRANTIES, SO THE ABOVE EXCLUSION MAY NOT APPLY TO YOU.
Information on this web site may contain technical inaccuracies or typographical errors. Information may be changed or updated without notice. Generational Capital Markets may also make improvements and/or changes in the products and/or the programs described in this information at any time without notice.
Generational Capital Markets does not want to receive confidential or proprietary information from you through our web site. Please note that any information or material sent to Generational Capital Markets will be deemed NOT to be confidential. By sending Generational Capital Markets any information or material, you grant Generational Capital Markets an unrestricted, irrevocable license to use, reproduce, display, perform, modify, transmit and distribute those materials or information, and you also agree that Generational Capital Markets is free to use any ideas, concepts, know-how or techniques that you send us for any purpose.
Information Generational Capital Markets publishes on the World Wide Web may contain references or cross references to other products, programs and services that are not announced or available in your country. Such references do not imply that Generational Capital Markets intends to announce such products, programs or services in your country. Consult a Generational Capital Markets representative for information regarding the products, programs and services which may be available to you.
Generational Capital Markets makes no representations whatsoever about any other web site which you may access through this one. When you access a non-Generational Capital Markets web site, please understand that it is independent from Generational Capital Markets, and that Generational Capital Markets has no control over the content on that web site. In addition, a link to a non-Generational Capital Markets web site does not mean that Generational Capital Markets endorses or accepts any responsibility for the content, or the use, of such web site. It is up to you to take precautions to ensure that whatever you select for your use is free of such items as viruses, worms, trojan horses and other items of a destructive nature.
IN NO EVENT WILL Generational Capital Markets BE LIABLE TO ANY PARTY OR ANY DIRECT, INDIRECT, SPECIAL OR OTHER CONSEQUENTIAL DAMAGES FOR ANY USE OF THIS WEBSITE, OR ON ANY OTHER HYPERLINKED WEBSITE, INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS, BUSINESS INTERRUPTION, LOSS OF PROGRAMS OR OTHER DATA ON YOUR INFORMATION HANDLING SYSTEM OR OTHERWISE, EVEN IF WE ARE EXPRESSLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Furthermore, all information contained within this website is the property of Generational Capital Markets.
Honored to win Investment Banking Firm of the Year 2 years running.
Over 50 awards and counting.
Sign up to receive regular email updates, industry-leading insights and details on complimentary M&A executive conferences in your area from our award-winning team
Success, you have been added to our list.