creating strategic value - exit planning exchange study slid… · 2 vistage international, white...

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CREATING

STRATEGIC

VALUE

Generating a Strategic Plan that Works,

Drives Sustainable Growth, & Creates Value

Catching a

falling Unicorn

Proprietary. Copyrighted Material. 2016. All rights reserved. Gregory A. Boucher

Interest in acquisitions

at an all-time high,

yet the number of deals has fallen.

Source: - Mergermarket, The Valuation Gap, March, 2015

3Proprietary. Copyrighted Material. 2016. All rights reserved. Gregory A. Boucher

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Source: Pepperdine Private Capital Markets Report, 2015

January 2016 was the worst Jan. in 10 Years


6Source: - MergerMarket

The trend is continuing through Q1 & Q2


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Buyers

Cautious;

Pay Up For

Bankable

Deals


The desire for transactions are very high and there’s lots

of CASH sitting on the sideline, waiting to be invested:

$1.5 Trillion in S&P 500

$500+ Billion in PEGs

More than $4 Trillion in Sovereign Wealth Funds

Plus lots of cash in companies not represented in the S&P 500

Valuations are High -- On a relative basis

Deal Volume is Down

Debt is VERY cheap and is readily available for bankable

deals

Competition for Bankable Deals (esp. lower middle

market) is very strong

Source: - Mergermarket, The Valuation Gap, March, 2015


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Sellers

Missing

the Target


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Source: Pepperdine Private Capital Markets Report, 2015

Transactions Terminated without Closing - 2015

Not Transacted

Transacted


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1. Valuation gap too large (Price / Value)

2. Unreasonable seller expectation

3. Insufficient company cash flow

4. Surprises in confirmatory due diligence

5. Loss of seller business or contracts, anticipated revenues

Sources: - Pepperdine Private Capital Markets Study 2014

- Mergers & Acquisitions: An Insider's Guide to the Purchase and Sale of Middle Market Business Interests, Roberts

- Mergermarket data, 2015

Major reasons for Deal Termination


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Valuation


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The Essence of Value

Value is influenced by the potential for future, sustainable earnings and the perceived level of risk

+ ValueBenefit

Risk=


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Usual range (2x - 6x);

Possible range (1x - 12x, ++);

Higher ranges may be justifiable in hot industries

with high growth rates, and

Lower Multiples are more likely in professional

services, resellers, commodity and “buggy

whip” businesses).

Multiple Realities


Failure

To

Launch


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1. No real commitment

2. Inability to change / Risk adverse culture

3. Not enough experience in execution or a model to follow

4. Strategic plan not realistic

5. Wrong people / No one owned the process (Lack of

accountability)

6. Poor / Inadequate communications between responsible parties

7. Lack of buy-in from key-employees and rank and file

8. Strategy goes against current power / hierarchy structure

Sources: Harvard, Warton, Forbes, FT: consolidated list ordered numerically as mentioned by these sources

Reasons for Strategic Plan Failure


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Sources: 1 U.S. Trust insights on wealth and worth® survey, 2014

2 Vistage International, White Horse Advisors, 2008

3 Smart Strategies for Ownership Succession, PricewaterhouseCoopers LLP, 1999

• Two-thirds of business owners do not have a formal succession

plan, including seven in 10 business owners over age 501

• 96 percent of boomer business owners agreed that having an

exit strategy was important — but 87 percent did not have a

written plan2

• 78% of business owners who do exit profoundly regret their exit

within 12 months of the close3

Failure to Plan Creates a Legacy of Regret


Baby Boomer Businesses Stats:

• 65 – 70% of all companies in the US are owned or

controlled by Baby Boomers*

• $10 trillion of private company wealth to be

transferred*

• $4 trillion in private company wealth for companies

$2.5M to $100M in annual sales**

Source: * U.S. Census

** The $10 Trillion Opportunity, Jackim, Christman

*** The $4 Trillion Opportunity for Business Ownership Transition, Mercer


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Group

Exercise


Prioritizing

Strategic

Initiatives


Risk / Reward Matrix


Effort / Impact Matrix


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Prioritize Strategic Initiatives through Scoring

10 Dimensions of Growth/Value


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Strategic Value Roadmap (Growth / Value Drivers)

10 Dimensions of Growth/Value


Pump UP

The Value

Of

Your Client’s

Business


1. Streamline mission-critical processes

2. Outsource the things you don’t do well

3. Build brand identity

4. Develop a tax minimization strategy

5. Reduce owner perks

6. Check / Negotiate better pricing from suppliers

7. Focus/Better Control costs and monitor margins

8. Introduce New Product Line with better margins

9. Discover New Markets where you can charge higher fees/prices

10. Diversify revenue (customer) base

OPERATIONAL Strategies for Value Enhancement


Arguments for Outsourcing

Increase Efficiency

When it comes to specific support functions, it is nearly impossible for your company to be as efficient as a company that specializes in

that function exclusively. In almost every case, the specialized provider will have superior systems, processes, technology and

experience. As your business grows, it becomes increasingly complex. It becomes increasingly difficult for you to maintain efficiency on a

consistent basis. By outsourcing you gain the benefit of superior systems without capital investment, and you avoid overburdening

current staff, increasing headcount or bringing in outside consultants.

Increase Effectiveness

Experts who are Specialized in a certain area will do the job right the first time at a much higher rate than the trial and error that

inexperienced people internally can due to experience and knowledge gained through functional specialization (Legal and Accounting are

obvious ones). For the High Growth Company, Strategy, Sales and Marketing although often affectively managed internally, will have

regular increases in demand for the departments that are responsible for Branding, Marketing and Sales. Hire On-Demand for increased

periods of activity and for needs outside the capacity or capability of internal staff – You can pick and choose what you need on an a-la-

carte basis from Outsourced providers in those areas.

Maintain Focus

Every hour you’re focused on an administrative, technical or back office issue is an hour of opportunity lost. When the support systems

and services are solidly in place and the distractions they create are eliminated, you can focus more time, energy and resources

exclusively on revenue-driving activities, like business development, marketing and sales strategies, customer relations and account

penetration, networking, recruiting and so on. Increased focus produces increased results.

Lower Costs

Through specialization, aggregation and automation, most business process outsourcers can reduce transaction, systems and

management costs. Outsourcing lets you leverage the provider’s investments and economies of scale, and it is most often less expensive

than handling the same tasks internally.

Reduce Risk

As employment and payroll and benefits regulation rapidly expands at the federal, state and local level, compliance becomes increasingly

challenging – particularly for those doing business in multiple states. The right provider accepts responsibility for compliance in the

functional areas it manages and the transactions it processes, effectively shielding you from risk.


Arguments for Outsourcing

Scalability

The right outsourced provider can give your company instant scalability. With an outside provider and a third-party team to handle all

the workload and manage the systems, you need little or no lead time to accommodate rapid growth or support new and special needs.

Maintain Compliance

HR may have to maintain compliance and reporting for up to 20 U.S. DOL and other agency regulations. There’s Securities; State;

HIIPA; PCI;, Privacy; and now Cyber Security and other areas that most businesses are required to monitor and maintain reporting for.

Outsourcing some of these compliance functions, can keep you on top of ever changing regulations.

Expertise

Outsourced service providers specialize in specific operational areas. That specialization and the volumes they manage in their

specific areas let these companies develop and maintain very specialized expertise – expertise that can benefit you. Best of all, their

superior expertise will usually come at little or no added cost to you.

Maintain Flexibility

Outsourcing allows you to commit to only what you need to at the time you are engaged in any business effort. Especially a large

transformational initiative where if you execute everything internally, you are required to dedicate a large amount of financial, human,

operations, personal, and intellectual capital to ensure success. By outsourcing some or a lot of the execution, you don’t have to build

up new infrastructure to try a new tact. If over time a new initiative is successful, you can determine if it’s more profitable to bring

internally and it will allow you to staff and organize more effectively as you will learn from the experience where your strengths and

weaknesses are, and where you need to shore up areas that need it.

Grow Faster

Over time, you can test more initiatives without having to dedicate too many resources to any one idea. By keeping some of your

powder dry and being able to pivot easier, you should have more opportunities that are successful. It becomes a numbers game.

Increase Profitability

By making better decisions, taking more chances and having more successes without dedicating a relatively large amount of capital to

each initiative, the increase in success rates over time should lead to higher profitability, faster!


More

information


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BOOKS FOR GROWING COMPANIES:1. The Breakthrough Company, Keith McFarland, Grown Business Press2. Good to Great, Jim Collins, Harper Business3. The Great Game of Business, Jack Stack, Bo Burlingham, Crown Business4. Scaling Up, Rockefeller Habits 2.0, Verne Harnish, Gazelles, Inc.5. No Man’s Land, Where Growing Companies Fail, Doug Tatum, Portfolio6. Building Business Value, Martin O’Neill, Third Bridge Press7. Mergers and Acquisitions, Dennis Roberts, Wiley8. Sell Your Business Your Way, Rickersten, AMACOM9. Mergers and Acquisitions from A to Z, Andrew Sherman, AMACOM10. Five Frogs on a Log, Feldman, Spratt, Harper Business11. Exit Right, Barre Pearson, Thorogood12. The Smartest Guys in Town, Boucher, Pending

For Further Study – Recommended Reading


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Resources (Strategic Planning / Value Assessment & Enhancement):

1. ProfitCents / SageWorks Software

5565 Centerview Drive | Raleigh, NC 27606

www.sageworks.com | P 919.851.7474 x596 | F 919.851.6718

2. One Page Strategic Plan

https://gazelles.com/g/one-page-tools/strategy

3. Core Value Software

https://corevaluesoftware.com/

4. Value Opportunity Profile

http://www.corporatevalue.net/for-business-shareholders/business-

owners/

5. Growth and Value Enhancement through Add-On Acquisitions

http://cdn2.hubspot.net/hubfs/497317/Forum_Downloadables/An_Introd

uction_to_Add-On_Acquisitions.pdf?t=1460729325906

Other Recommended Resources


http://www.sageworks.com/

https://gazelles.com/g/one-page-tools/strategy

https://corevaluesoftware.com/

http://www.corporatevalue.net/for-business-shareholders/business-owners/

http://cdn2.hubspot.net/hubfs/497317/Forum_Downloadables/An_Introduction_to_Add-On_Acquisitions.pdf?t=1460729325906

creating strategic value - exit planning exchange study slid… · 2 vistage international, white...

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