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Mergers and Acquisitions, Pre-sale Planning, Selling a Business, Family Business, Corporate Divestitures

Three steps to a great (not just “good”) M&A exit

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In preparing for an upcoming event where I’ll be moderating a panel made up of an investor, an advisor and executive who each have been through the M&A process, I’ve been considering some of the more successful M&A exits my firm has been involved in.  One of the topics the panel will be covering is: what can be done in the 2-5 years before an exit to help maximize value?  

We’ve worked with dozens of companies in recent years at Mirus and there are a few themes that stand out when we compare the most successful “great”
exits to the merely “good” exits.

  1. Think. Identify the most attractive elements of your business. What will an buyer or investor truly value? This may be stability of customer base, technical innovation, market-leading solutions / market share, customer clout, rapid growth or any number of attributes which could lead to more upside for the new owners down the road. Build senior team consensus around the conclusion.
  2. Focus.  This may be investment in the fastest growth product line, pursuit of the largest customer opportunities, the build-out of a truly comprehensive solution to a critical customer issue,  or other execution tasks.  Don’t let the team be distracted by off-strategy opportunities.
  3. Measure.  Collect data to demonstrate to buyers/investors that you’ve executed to your plan, or corrected where it made sense to do so.  How many customers did you approach with that new solution? What was your pipeline like last year? How much did you invest in that new product launch?

The best M&A outcomes do combine great business strategy with execution, and are supported by solid data on company results beyond what you find in GAAP financials.  The most impactful strategies will align with value creation.  Thinking ahead to an exit – identifying those characteristics likely to have the biggest impact on value and then building on them – is a very useful lens for viewing alternative strategies.   Focusing on those key areas, and reallocating resources towards them, is often organizationally difficult but can make all the difference.  One client refocused the company’s manufacturing resources away from providing contract manufacturing services to producing a branded product line, and with little new capital investment went from a 10% margin to a 30% margin business.  Another focused on a high growth, recurring product line and nearly doubled its bottom line in two years. The measurement dimension is determined by the strategy — how do you define success? what are the management metrics you follow? what’s the customer retention ratio? what’s the early-warning signal for an issue with an account?  Buyers pay for the future, so supplying the key business metrics that enable bidders to form well-reasoned views on the future of your business should be an element of your M&A process.

We’ve seen middle market companies pivot to new strategies or shift resources in advance of a transaction, and significantly increase value to shareholders (think 2-3x in three years for “non tech” companies, and even more for high growth software businesses).  If you’re considering an exit for your business in the next 2-5 years, or are advising an owner who is, add “thinking through avenues for significant value creation” to the list.  It could make the difference between a “good” and a “great” outcome.


Alan Fullerton is a partner with Mirus Capital Advisors. He works with owners of middle market businesses and can be reached at fullerton@merger.com.