What is "Value-Building"?

The sooner you start, the higher you'll climb

Most company sales fall short of the heights that could be achieved because most owners and managers fail to focus on value building. It is not easy to run a business and build its value at the same time. And very few M&A advisors are willing to help well in advance of a sale, when no big fee is imminent.

Value-Building (in the year or two prior to sale) takes you beyond grooming, to real performance improvements that will attract more buyers and warrant a higher profit multiple when they come to value your business.

We have 2 ways of providing advice on Value-Building

On a confidential consultancy basis for you or your team

OR

Through our Value Improvement Programmes, designed for groups of MD's meeting on a monthly basis

Either way, the 2 key elements of Value-Building are described below:

A. Grow your profits

If you want to sell your business for a premium price, you need to get your profits on a better growth track than your industry average. A number of our clients have more than doubled their profits within 3 years, some much faster. We can help you and your management team achieve substantial and rapidly growing profits through big increases in your profitable sales and significant improvements in your operations.

We help you grow profits by sharpening your strategy in the light of customer feedback on your value-added relative to that of your competitors. We help with implementation by ensuring that management information systems include measures to encourage all the activities required for success. We break down sales growth targets and cost reduction targets into manageable components. And we help you harness and motivate your team by ensuring that everyone understands not only the game-plan, but their role in delivering it.

We also help you communicate growth potential in ways that are helpful to buyers trying to understand your business from the outside. Shield can act as your value-advocate, articulating the case for the various growth avenues open to your business. Even speculative growth avenues, with a lower likelihood of materialising, can be valuable in the buyers' eyes. Shield knows how to capture this value for the seller by quantifying the various growth avenues available to a business, and persuading buyers to pay up for it.

B. Tackle "Value Depressants"

All sorts of concerns keep buyers from offering full value for a business, and they won't usually mention more than a couple because they don't want to appear over-cautious or risk causing offence. We call these concerns "value depressants" and we help our clients get remarkable results by removing them before any sale starts. It makes sense to use whatever time is available to reduce the risks and obstacles which are likely to undermine buyers' confidence when they do come to focus on your business and its prospects.

We have developed a set of tests to diagnose opportunities for profit growth, multiple increase and obstacles to sale at a premium price. With this "MOT"-type checklist, we put ourselves into a buyer's shoes and examine your business just as a buyer would. The results of the examination will give you a clear picture of what still needs to be addressed before you consider coming to market. We can then develop an action plan for tackling whatever value depressants have come to light. This way you will have the comfort of knowing that your business has been assessed just as a professional buyer would assess it, and due diligence and further buyer scrutiny should hold no major concerns.

Results achieved

Our clients have been astonished to find how much value can be added to a sale by turning time in advance to their advantage:

Establishing growth records, which attract more buyers and higher valuations

Focusing investments and acquisitions on areas that will appeal to the likely buyers (rather than put them off)

Ensuring that the business is not totally dependent on any one person

Reducing dependence on key customers

Overcoming the "Small Company Discount"

In one case, our assistance with quantifying growth potential opened the eyes of management to the attractions of an MBO, which provided a better outcome than a trade sale under the conditions prevailing at the time.

In another case, our special approach to detailed growth planning underpinned the negotiation of a 33% increase in the price offered by a preferred buyer.

What is "Value-Building"?

2. Prepare for sale

Shield's Value Building

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