When it comes time to leave your company, you want to do it not only profitably, but admirably, right? You not only want top dollar, but you want the fruits of your labor to be recognized, appreciated, and rewarded—above that of the competition. What you’re looking for is a coveted “outlier outcome.”
This is Part 3 in our Outlier Outcomes series. By way of review, let’s look again at how to achieve this phenomenon with your exit. For this to occur, you need exit velocity where the following Outlier Outcomes characteristics are met. When these are in place, the performance of your company on the sales block is most likely to outstrip that of your peers.
In summary, Outlier Outcomes typically have:
- A highly differentiated offering or Unique Value Proposition (UVP)
- Historical revenue growth above peers (sales and marketing performance)
- Historical EBITDA growth/margin above peers (financial and profit performance)
- A fully staffed and capable management team that will stay after closing of a transaction
- Defensible growth and expansion plan that the company has invested in
- Good positioning and story compelling to investors
- In a good tailwind sector (ICP identified, and markets poised for additional growth)
In this post, we will discuss the final two points above.
There is an M&A axiom that has been the mantra of many: “Companies are bought, not sold.” At JD merit, we believe we must proactively turn this axiom around to, “Where Companies are SOLD, not BOUGHT!
This is where JD Merit shines! Owners are often too close to the day-to-day operations of their company to fully craft a compelling messaging to buyers and potential investors about its position. We believe getting a company’s key differentiators and positioning correct is a core competency of a successful I-Banking team, and an oversized element of success in achieving a sale.
You need a team that can accurately assess:
- Is the story compelling to investors?
- Can owners tell their story well or do they need help and coaching?
- Is the messaging focused on the past AND future in the correct proportions?
- Does the company’s positioning fit with buyers?
- Can the messaged be crafted with relevance to each potentialbuyer, so they see the unique maximum value to them?
- Does your banker know enough, or learn enough, about the buyers’ pain points and synergies to move some of those over to the seller’s side or the ledger by understanding buyer’s post-transaction economics? Being able to assess the true value of your firm to the buyer’s strategic growth plans is key to getting an outlier outcome.
Catching a Favorable Tailwind
Is your company in a good “tailwind” sector?
“Headwinds” and “tailwinds” are both ways of describing extrinsic or macro phenomena that affect a business in its operation or performance. This terminology has its roots in important weather phenomena for ships at sea: a headwind can make a ship’s progress difficult or downright impossible, and a tailwind makes it easier by propelling the ship forward at increased speed.
Most of the time, the circumstances causing these conditions in a particular sector are out of a seller’s hands. While we can’t always control macro-economic forces, by staying focused on Differentiation, Innovation, a strong sales process, great financial data and reporting, and a fully baked Growth plan, your company can overcome even difficult sector headwinds.
By having these six factors in place, you will invariably be ahead of your peers within the sector. If you have a defined ICP and are well positioned due to your past investments, your company is likely to be purchased in any market, and with an outlier outcome.
So, here’s to your best exit and an Outlier Outcome!
We hope you’ll reach out to discuss the best path for your company to grow or build generational wealth through the recapitalization or sale of your private company.
Click here to check out part 1 of the Outlier Outcomes series: https://jdmerit.com/outlier-outcomes-part-1-differentiation-and-growth-rate/
Click here to check out part 2 of the Outlier Outcomes series: https://jdmerit.com/outlier-outcomes-consistent-profitability-defensible-pro-forma/
253-370-8893 | Craig.Dickens@JDMerit.com | @MandAexit
Craig Dickens, CEO JD Merit
Craig is responsible for setting the firm’s vision, creating a culture of boutique personalized service, and recruiting experienced investment bankers to build the JDM team nationally and internationally. Mr. Dickens has advised many leading companies and participates on several middle-market company boards.
Having participated in every kind of business dynamic from start-up to IPO, merger to dozens of acquisitions in his own entrepreneurial career, Mr. Dickens serves clients by guiding them to strategic growth, business optimization, and profitable exit. JD Merit is a leading boutique investment bank focused on entrepreneurial middle-market companies. JD Merit executes sell-side M&A, buy-side M&A, capital advisory services, debt and equity capital raises, corporate finance, and valuation services. www.JDMerit.com