Jason Bass, a managing director at Harris Williams & Co., recently participated on a panel at the 2017 Inc. 5000 conference. The panel addressed CEOs and senior management of privately held, high growth companies about exit strategies. Outlined below are a few key themes that were discussed.
What should I do in advance of a transaction?
- Be sure to have a good accounting firm that has M&A experience. Conduct a thorough audit of your financials to know exactly what the buyer is going to see before going to market.
- Bring your management team together as a trusted team to work through the transaction.
- Engage an advisor early – it’s never too early to have a relationship with an M&A advisor.
- List what is important to you other than or in addition to the dollar value.
- Decide what you want in a buyer and what is important to you moving forward.
- Call references for potential buyers – be sure you include those who have worked with the investor through challenging times.
Are there things you would advise people not to do?
- Don’t listen to everything you read online. Many times the stories you read are the extremes.
- Be wary of buyers taking short cuts. Know what is going on in the market in order to be aware of norms and what you should expect.
- Don’t be afraid of institutional capital – private equity is the modern day IPO.
What contributes to valuation multiples?
- Recurring revenue, growth, and a diversified customer base are three critical components to determining valuations.
- Be able to communicate your company’s value proposition in a concise manner.
- Your company’s position in the market will impact the valuation.
- The strength of the management team is very important when investors are looking at a company.