13 Feb Around the Web: A Week in Summary
A recent article from Business Wire entitled “2019 M&A Outlook: It’s Still a Seller’s Market – For Now” discusses the current state of the M&A market, how this compares to last year and what surveys predict going forward.
Currently, as it has been for some time now, the market is favorable to sellers who are reaping the rewards of selling their businesses for premiums. These same prices however, have begun to drive some buyers away, awaiting the inevitable decrease in pricing. Because the market has been so strong for so long, many see the economy as being at a mature point and therefore many buyers and sellers are accelerating their M&A strategies to get ahead of the upcoming slowdown. While many companies expect multiples to continue rising in 2019, sellers are eager to close deals in fear of having to put their exit strategies on hold until the market rebounds.
A recent article from Forbes entitled “Make Sure Your Business Is Worth Handing Over” explains why it is critical for family businesses to prepare for succession with a focus on the future.
Family businesses should be focusing on building a business that is stable, healthy and prepared to run smoothly in the future. Focusing too much on simply providing a job or transferring wealth to future generations can create dangerous problems for the sustainability of a business. Here are five principals to consider when preparing your family business for succession:
- Rather than sweeping them under the rug, identify and fix your problems. It can be easy to “overlook” problems in business operations when the next owner has been there from day one and knows the company intimately, but it can be harmful to the overall health of the company.
- Adjust your management to the strategic evolution of your business. As a business grows, it goes through different stages. If the current management is not properly suited to handle the transition between the current stage and the next, it’s time to make some changes.
- Talk to your employees about their future, how they’re doing and where they’re going.
- Be on the lookout for talent everywhere. Skills can be learned, be willing to bring someone on that is naturally hard working or is hungry to make a contribution.
- Give your employees the chance to improve their skills and expand their leadership potential.
A recent article from Divestopedia entitled “A Closer Look at What Drives and Influences Business Valuation” lists the factors that influence the value of a business in order by most influential to least.
Striving to maximize the value of a company is a best practice in any situation. Working towards that goal is most effective when key drivers are being monitored, tracked and used to make changes. The best way to drive a high valuation is to prove that the business is going to be a profitable investment to the buyer in as many ways as possible. This can be done by showing future profitability and low risk factors. However, the type of buyer that is interested in the company will also affect the market value. For example, a financial buyer will be looking for a customer base that is secure while a strategic buyer will be looking for a customer base that is a specific niche of the market.
If you want to improve the value of your business, a good practice is to conduct regular due diligence. Look at your company from the eyes of a buyer, considering the factors laid out in this article, and use the results as a platform to improve upon. For expert advice, contact an advisor who is experienced and can provide you with specific guidance towards reaching your business value goals.