Share Available Improvement Opportunities With Potential Buyers

July 1, 2023 | by Keith Yeater

Over the years, I have had the privilege to attend many initial management meetings with our partner private equity companies as they explored potential targets.  In almost every case the deal team was provided an overview of the company often called CIM or “Confidential Information Memorandum”.  As you are aware, in this book are pages and pages of leadership overviews, financial details, and sales opportunities, the company has yet to capture.  Most often these books dedicate a couple of pages to an operational overview and performance of the company.  Occasionally you might see a bullet point or two about operational improvement opportunities they believe can make.  After these management meetings, the potential buyers go back to their offices and work up their qualifying offers.

As the buyer’s team works through their qualifying offer, they comb through financial reports with a confidence that the numbers being reported are accurate.  Regulations like Sarbanes-Oxley, GAAP accounting and provided 3rd party audited financials have helped develop this level of confidence.  Unfortunately, there is no standard of compliance for operational performance.  Wouldn’t this additional confidence in both the current health of the operations and a clear view on how to capture future improvements allow the buyer to more confidently create an offer? Utilizing an experienced third party to provide this unbiased operational health check and vision for future opportunities could help provide this confidence.

Share with Potential Buyers the Improvement Opportunity Still Available

So, you have now spent time prepping your company to sale.  You have made improvements that may significantly improve ROI. And you have a current-state analysis of the condition of the operations.  What is next?  First, tell your story: Share with buyers how you have established a continuous improvement culture.  You can demonstrate this culture by sharing your success stories, focusing primarily on financial performance.  This demonstration of the dividends of a CI culture will help reinforce that the leadership team is strong ready to take on the next challenge. Thus, bolstering the confidence of the acquiring company.

Finally, do share with future buyers what the next frontier is for operational improvements.  It is assumed that you have created an operational future-state.  You or your service provider should quantify the anticipated savings associated with the activities.  Additionally, you should share the timing and effort associated with attaining the future state as it will give confidence to the acquiring company.  Though it is understood that you may not be 100% rewarded financially for future improvements it does allow the buyer to understand where you are trying to take the operations and thus allow them to bid with full knowledge.

Thinking about selling your company or if you want to explore how simple it can be?  We can help. Contact us to get expert advice today!

Competitive Business Solutions assists businesses in building a comprehensive divestiture approach that addresses critical strategic business operations.