In the past six months, our firm has heard more inquiries about troubled companies in need of a “turnaround” buyer than we had encountered in the past several years. I don’t know if that’s indicative of an overall trend, but lately it has made us become more sensitive to the issues, and more aware of the opportunities that may relate.
Considering possible sale when times are tight and operations are tense, is a different process, and can be difficult for owners. However, the potential for excellent results is still there, with optimal handling and strategies. A handful of tips to consider, if you may be in that situation:
1. Don’t wait too long. Owners are naturally tempted to delay, because until things become really grim, it’s awfully easy to “hope” that good things may turn up to solve the problems. However, the appearance of likelihood for potential of reversal of problems, or salvage of business benefit, can take an amazingly steep downward turn in a really short time. Sale AHEAD of the major downturns improves value.
2. Be observant and creative in thinking about potential alliances that might benefit from your company’s capabilities, contacts, and potential. There may be adjacent suppliers that cater to many of your same customers, who would love the ability to add your capabilities. There may be things you do very well for a narrow customer mix, which might be expanded to sales in new segments, which could boost value tremendously. Look for potential “fits” in a full 360-degree radius, all around what you currently do, and who you currently do it for.
3. Don’t allow “housekeeping” to get too far behind. If you have unused equipment, or equipment in need of repair before it may be used, get rid of it. It probably won’t generate much cash in the exit, but it may significantly enhance appearances and efficiency of operations.
When the time comes to give serious consideration to possible sale, and to evaluate next steps, keep it quiet and move with care with only a top handful of potential suitors. Identifying the “best” is tricky, and worth spending some time and money to focus well.
If you have key shareholder-operators who may benefit from a nice bankroll to fund growth, or from exciting cross-sale business addition opportunities, you may be able to create the potential for a long term “win,” for operating shareholders especially.
If times are tough, keep your eyes open for exit strategies that may be much stronger today than if you delay. Strong financial resources, knowledgeable operations help, and potential customer connections can nurture the future in dramatic ways, and may be impossible without the support of change.
