To achieve your euphoric exit, make sure you are monitoring your industry M&A activity
When a surfer arrives at the beach, they don’t just gear up and head into the water. They first observe the conditions, or the environment they are considering surfing in. When it comes to preparing yourself and your business for a future euphoric exit event, you’ll want to take the same approach.
Here are some good questions to regularly ask yourself and build the environmental awareness you’ll want for a great future exit event:
- Are companies being acquired in my industry or does it appear that companies are selling to exit the industry?
- If they are exiting, try to reach some of the Sellers and inquire what dynamic they were experiencing that led them to the conclusion that exiting was in their best interest.
- If companies are being acquired in your industry, who is doing the buying? Are they Strategic players already in the space that want to expand their penetration and/or financial sponsors (such as Private Equity) wanting to enter the industry you’re in?
- For those acquiring in your industry, what do they find attractive about it? For companies that are doing the acquiring, leverage your network to help you answer the question of why they are expanding/entering your market sector and is it due to dynamics you are or aren’t aware of yourself?
- For companies acquiring, what criteria are they using in making their acquisition decisions? Are they looking to buy scale, specific products/services, capacity, intellectual property, people/talent, geographic expansion, etc.? Knowing this can help you identify what steps you may need to take to address any gaps in the areas you’ve learned acquirers are placing value on.
- Based on the criteria that acquirers are using, how does your company fit those criteria? Are you strong in each of the areas they desire, or do you have any gaps that you’ll want to address before you attempt selling one day?
- Is there an optimal timing window that you should consider selling your company? If acquirers are active in your industry, should you consider an exit sooner as waiting too long might have you miss the window of when premium valuations are being paid for businesses like yours.
- Do you know what the range is for the exit multiples that acquirers are paying for companies in your industry? Leverage your network to find out what the range is and what types of companies are commanding the upper range of the exit multiple so you can be aware of where you’ll need to build your business to also command the premium one day.
In working with our clients, we help them better understand the environment that they are operating in. Having this awareness can be instrumental in helping to build company net worth and in building the awareness that could help you achieve your future euphoric exit event.
