Building Strategic Value
How can you sell your business for strategic value?
Who is likely to buy a business for more than 6 - 12x EBIT?
How do you build a high business valuation premium in your business?
What is Strategic Value?
Strategic value is the price that one particular buyer (or group of buyers) is likely to pay for your business on the basis that they gain a greater benefit than your business would provide on a "stand alone" basis (market value).
In most cases you will be selling to a buyer (or through a merger) that stands to gain a lot of leverage from your business, and both parties will know this in great detail.
So they will be prepared to pay a premium for your business. It is not uncommon for a strategic sale to attract a price more than 2 - 3 times the value it would otherwise in a trade sale.
To learn more about building and creating strategic value in your business, download our free whitepaper on Building Strategic Value and the Strategic Sale.
Benefits of Building Strategic Value
Basically the key benefit of building strategic value in your business and securing a strategic sale is being paid a massive business valuation.
In most cases you will be selling to a buyer (or through a merger) that stands to gain a lot of leverage from your business, and both parties will know this in great detail.
So they will be prepared to pay a premium for your business. It is not uncommon for a strategic value transaction to attract a price more than 2 - 3 times the value it would otherwise in a trade sale.
Typical strategic buyers will be larger (often much larger) than your business and want a quick way to expand or enter a new market. They are likely to pay EBITDA multiples much greater than the typical market value.
So how likely is it that your business can attract a strategic buyer and what are they likely to pay?
Our Building Strategic Value Process
Building strategic value in your business takes time – it is not done overnight. Strategic value comes from a combination of two businesses that both have something to gain. As a result it can take time to develop the right opportunities to present to the right buyer.
Building Strategic Value is about creating the best exit strategy that gives the highest business valuation - and that takes time. We have explained more detail on how to build the strategic value of your business in our blog article.
We have learnt that the best business valuation comes when:
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The underlying business is attractive and profitable with key competitive advantages.
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The strategic buyer has so much to gain from the acquisition that it makes sense to pay a strategic value for your business.
After working with many clients, we have developed a four stage process that can be implemented over a time scale that suits you:
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Strategic Value Assessment
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Testing Strategic Value
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Growing Strategic Value
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Realising Strategic Value.
The first two stages are designed to determine how likely it is to achieve a strategic value sale and what would be the likely business valuation obtained.
The latter two stages are about increasing the value of the business and implementing strategies that give you the best strategic value.
Each stage is “self – contained” and builds on the previous stage. It allows time for a business to address issues, making sure the underlying business continues to operate effectively and profitably and to attract the right buyer.
Make an enquiry today for an obligation free discussion on your strategic sale opportunities and how our Strategic Value process can build premium value for your business.
Recent Strategic Value Transactions
Strategic value transactions do exist and they often come with a bucket of money - and perhaps a few conditions as well.
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St David Dairy sells for $15.25m at an EBITDA multiple of 11.3x (2018)
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Digital marketing agency The Works sold for $33m at an EBITDA multiple of 8.5x (2017)
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SmartFreight sold to ASX listed Wisetech Global Ltd for $20m upfront cash at an EBITDA multiple of 20x (2018)
These multiples represent a market value premiums of 150% - 500%
Strategic value transactions take time to develop, build, attract and deliver.
It takes a strategic approach to finding the right buyer that has the right money to do the right deal.
