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The Fourth Component Of Value – Strategic (Part 5 of 7)

4 April 2008 No Comment

The Fourth Component Of Value – Strategic

Now you’ve done everything you can do inside of your business to build the value. Strategic value is that extra value that an acquirer places on your company because of what’s possible for them by owning you. You may have a niche product that exactly fills a hole in their product line. You may have a solution that can be sold to a large part of their customer base. You may have technology that enhances their products. You may have processes or a distribution channel that can help them scale their businesses. Not all buyers look only at dollars and cents. Whereas financial buyers look for a good deal based on cash flow, growth rates, asset values, and upside, strategic buyers have added needs relative to their own operations. Those corporate buyers also have money to spend and they’re often willing to spend extra because of the leverage that your particular product, customer base, technology, or processes offer them (or deny their competition).

Finding and assessing that strategic value requires specific expertise and perspective into the market of potential buyers. The knowledge you have of your own industry is a good start. That needs to be combined with an in-depth knowledge of the M&A climate, capital markets, and competitive transactions. Having an idea of the buying habits and strategies of potential acquirers goes a long way towards being able to position your company most effectively.

What to do now:

  1. Meet with your investment banker to get a current market perspective, even if you’re not ready to sell.
  2. Complete an analysis of strategic value points for potential acquirers.
  3. Blend market and strategic analysis into current business and strategic plans.
  4. Focus innovation on improvements with strategic value.
  5. Protect your IP, both existing and in development.

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