I recently attended a business panel presentation, and the topic was “navigating business lifecycles – from early stage, to maturity and beyond.” During the Q&A session, one of the attendees asked about attributes that can create significant business value in the eyes of an acquirer. This made me think back to some mental notes that I have made over the years. Some of these are from Vistage speakers and fellow Vistage members. Others are my own observations as a serial CxO. Here are a few of the key attributes that I look that can create significant transferable business value.
How do you stand out from the competition when it comes time to seek investment capital or sell your business?
- Owner independence from executive management – How do you value a business whose success is tied to one or two people? What happens if these folks check out or get “hit by a bus?”
- Decision-making leadership team – Closely related to 1., does the company have a skilled executive team that can implement the company’s strategy and drive execution? Strategy without execution = hallucination.
- Clear focus on competitive advantage – Is your company a commodity business, or does it have a distinct competitive advantage – its “secret sauce?” Is management focused on exploiting those differentiators to drive customer engagement and business value? [Few, if any, competitive advantages are sustainable long-term. Leadership must constantly revisit and refine their companies’ differentiators.]
Is your company a commodity business, or does it have a distinct competitive advantage - its “secret sauce?” Is management exploiting those differentiators to drive customer engagement and business value? Click To Tweet
- Credible business planning and financial projections – This one speaks for itself. The operative word is “credible” – we’ve all seen too many wildly optimistic plans and forecasts.
- KPIs that demonstrate a deep understanding and fiscal control of the business – What information does management use to run the business, or to predict external influences on the business (Purchasing Managers Index, monetary policy, weather, etc.)? I love two or three page “KPI dashboards” that present critical financial and operational metrics.
- Effective systems, processes and internal controls – Does the company have systems that are scalable for future growth? In a private equity acquisition, this could allow the company to serve as a platform for a buy and build strategy through future acquisitions.
- Intellectual property – Also related to competitive advantage, does the company have trade secrets and/or protected IP that will add value in the eyes of a suitor?
- Business and/or customer diversification – Again, this is self explanatory. Business and customer diversification are important elements of a comprehensive risk management strategy.
This is by no means an exhaustive list, and I’m sure that people who work daily with merger and acquisition transactions could add a few good ones to the list. But….at least I kept the list under 10!