Strategy
Strategic planning is the bedrock of any enterprise. Regardless of whether a business is expanding or contracting, all planning must begin with the company’s advisory team and its board of directors. It is important to note that all strategies must be adaptive and take into account variables such as the company’s goals for the future, as well as the size of the enterprise.
Corporate Strategy calls for putting together several strategic businesses that have similar or complimentary operating elements, such as location, marketing, technology, and intellectual property, under common management.
The cash flow from these companies is usually reallocated internally to maximize long term return.
Adapting such a strategy usually means constantly seeking new investment opportunities, while entertaining divestiture of both high and low performing components.
Sector (Group) Strategy calls for assembling, under one corporate group, operating units that have commonality to them all. Cash flows are allocated and reallocated back out to the individual business units, or into new internal or external investments.
Business Unit Strategy calls for acquiring, under common management those product lines that have commonalities. In most cases marketing and manufacturing are the common elements. In this case cash flows are reinvested into the most promising units from the acquisition of new product lines or start-up operations.
Product-line Strategy is based on the theory of supplementing or replacing aging products whose life cycle is showing decreasing profitability with new or add-on products.
Functional Strategy addresses looking for lower labor rates, new methods of manufacturing, availability of raw materials, benefit packages, and any other methods of decreasing expense, increasing profitability, and addressing new market needs.
Business owners should account for the company’s strategic direction.
Maximizing your company’s competitive advantage is one of the smartest moves any business owner can make. Strategic planning creates the opportunity to position your business for the future. Businessowners with closely held businesses experiencing growth should optimally plan for the next three to five years. Those looking to sell a business in Atlanta will want to focus on succession and exit strategies with the assistance of VR Mergers & Acquisitions.
Target Evaluation
The evaluation criteria of a candidate should focus on three important issues:
- Sector or Industry
- Size
- Price
This type of screening approach can be accomplished in a manner whereby fundamental information and research is presented by a VR intermediary to the client, reflecting all potential goals and requirements. There are many companies worldwide available for acquisition or divestiture, making it crucial to focus on identifying the right opportunities.
That stated, it is vital for parties to be focused locating the right transaction; however, a business brokerage in Atlanta can provide invaluable guidance and insight. With the right focus and strategy, it is possible to evaluate targets in an efficient manner so as to create an array of possibilities of the company. It requires a keen attention to detail to sort through all the options and find those that meet the developed criteria set for target evaluation.
That being said, the search and screening process justifies only so much time in the world of lower middle and mid-market transactions, since the parties have to be prepared to take action quickly.
A savvy approach, as mentioned above, is to use three key indicators for initial screening: price, size, and sector/industry. Our team will work with you hand-in-hand for determining additional key attributes.
Due Diligence
The basic function of due diligence is to assess the benefits and liabilities of a proposed transaction by inquiring into all relevant aspects of the past, present, and forecast future of the business being considered.
Due diligence plays a critical role in the Merger & Acquisition process.
Many operate under the theory that once the “handshake” has taken place the deal is complete. In reality, the work has just begun. To determine whether a transaction is as good as it appears, an investigation, “due diligence”, and verification of all representations needs to be completed with the help of professionals.
The scope of due diligence may range from a small effort (reviewing available financial information, visiting facilities, and discussions with management) to a maximum effort that involves a comprehensive investigation and audit. Depth depends on the size and significance of the transaction, price, available audited financials, and the amount of inherent risk present.
A sampling of areas of investigation that should be taken into consideration:
- Company background and history
- Principle locations and facilities
- Management and executive teams
- Competition and competitive strategies
- Industry growth rates and profitability
- M&A activity in the industry and sector
- Government regulations
- Patents, trademarks, and copyrights
- Financial and accounting information
- Taxes and timing issues
- Major products, new product development, and obsolescence
- Sales histories and trends
- Market share, product life cycles, and technologies
Some common problems or exposure areas that need to be further investigated:
- Inventory distortions and overvaluation
- Litigation
- Dressing up of financial statements
- Receivables not collectible
- Sufficient information and background on management
- Tax contingencies
- Unrecorded liabilities and related-party transactions
- Poor financial controls and future expenditures
- Regulatory problems and foreign operations
If proper planning has gone into the process, the effort involved to complete due diligence will be routine.
Acquisition
The environment for acquisitions is extremely competitive and therefore makes it advantageous for acquirers to be both well prepared and opportunistic.
It is essential that business buyers, no matter the size, understand key trends in the market as well as their causes. Additionally, acquirers must prepare for all phases of the transaction so that they can react promptly and in an intelligent fashion.
By designing an acquisition program that directs sufficient attention to each phase of the transaction, time is spent on completing those acquisitions that should be completed under reasonable terms, while avoiding transactions that do not make sense. Implementing a disciplined approach to the process, will help identify specific companies in target industries of interest.
Regardless of your experience level, the completion of an acquisition is rarely easy. The sooner you find a professional and skilled business broker in Atlanta, the better off you’ll be. VR M & A advises clients to involve us early in the process so that we can develop an understanding of what others are currently doing in the marketplace. Once we have this information, we can help you navigate the more complicated areas of the transactions. Adopting this path forward, quite often translates to a difference between a successful deal and one that fails to live up to its potential.
Divestiture
Even the most difficult divestiture obstacles can be overcome through extensive preparation.
Becoming a prepared seller can help maximize value and reduce risk.
For the acquirer, the prepared seller’s assets are more valuable since they are able to quickly execute the transaction and immediately focus on capturing synergy.
To become a prepared seller a divestiture process plan should be developed prior to contemplating a transaction.
Both transaction and separation readiness are key in preparing for a sale and execute simultaneously.
Transaction readiness includes selecting an optimization strategy, preparing financial statements, planning for tax efficiency, and establishing a voice for the business. Separation readiness includes establishing a definitive separation strategy, assessing functional impacts, eliminating stranded costs, and creating a “Day One” readiness team.
Engaging these considerations – among others, in advance of a divestiture, can enable a company to become a better prepared seller.
Transaction Execution
Value is gained through a successful transaction, and can be enhanced through seamless and rapid execution.
VR’s detailed focus on planning, communications, and executing, maintains business continuity for clients, employees, investors, and shareholders.
As lower middle and mid-market companies continue to demonstrate their importance to the overall world economy, they also are demonstrating resilience and adaptability.
It is key to note that the dynamics of the marketplace are constantly changing. However, with that stated, basic factors will always remain stable and present.
In the simplest of terms, there are some variables that will remain constant. For example, industries tend to consolidate, families will disagree about the future, corporate divisions may be divested, and organizations experiencing rapid growth will need capital as well as other resources. We never lose track of the fact that private middle-market transactions are different in that they have special characteristics. Due to these special characteristics, an approach that is different from the merger of two large publicly owned enterprises is required. When you look to find a business broker in Atlanta, be sure they understand this fact.
VR Mergers & Acquisitions specializes in private lower middle and mid-market transactions.
Integration
Acquisition integration plans should be formulated even before negotiations finalize. To ease the transition an internal team whose function is focused on integration should establish which managers will be directly responsible for specific activities after the acquisition.
Key areas that should be addressed by the integration team can include:
- Planning for possible incentive compensation programs to motivate and assure retention of key executives of the target company
- Developing probable reporting relationships
- Analyzing which functions will be integrated and which will remain autonomous
- Preparing for potential personnel conflicts
- Combining productive assets
The exact forms of integration needed will depend upon the type of acquisition completed. After all, an acquisition is based on the premise that gains from the transaction will exceed the premium paid for the acquired organization.
Since 1979, VR Mergers & Acquisitions has specialized in the advising privately held lower middle and mid-market companies navigate the transactional process.
VR is considered the innovative leader in the sale of privately held enterprise.
Every day, more and more business owners demand our proven skills and resources to help them succeed in an increasingly complex middle market.