The company, XYZ, co-owned by stakeholders looking to retire, aimed to sell within the next year. Despite being approached by several prospective buyers, the offers received were disappointingly low, reflecting underwhelming valuations of the business. Before going to market, they asked us to perform an Exit Readiness Assessment to determine whether their company was ready to be sold.
Background
Issues Identified
The ERA scores and analysis revealed that the company's readiness for sale was below the minimum score to achieve their target price. Our comprehensive ERA highlighted three critical issues:
The future growth narrative presented to potential buyers was not convincing, lacking a realistic and executable plan.
There was no clear leadership succession in place, which raised concerns about the company's future stability.
Inconsistent financial performance.
RSP recommendations:
Given the specific challenges identified in our ERA, we recommended a strategic overhaul to address these core issues:
Delay the sale process for 6 months
Redefined the business strategy to focus on high-growth areas and improve service delivery.
Developed a systematic approach to build and maintain a strong sales pipeline, critical for demonstrating ongoing business viability and growth potential to prospective buyers.
Implement a comprehensive leadership succession plan, which included leadership training programs and strategic hires to ensure a smooth transition and continuity in governance.
Analyzed and restructured historical financials to more accurately reflect actual performance.
XYZ implemented the recommendations with the support of RSP who acted as an Operating Partner. These targeted initiatives led to significant improvements in the company's operations and strategic positioning:
Strong Leadership Framework: The established succession planning and leadership development ensured that the company was viewed as more stable and sustainable by potential buyers, greatly enhancing its attractiveness.
Financial Stability: The restructuring and clearer representation of financials, combined with improved financial controls and operational efficiencies, resulted in stabilized revenue and increased profit margins.
Enhanced Market Position: With a clear growth strategy, improved operational capabilities, and a strong sales pipeline, the company was able to capture new markets and increase its competitive edge, contributing to an enhanced enterprise value.
Effective Buyer Engagement: The roadmap to buyer engagement facilitated more strategic discussions with potential acquirers, aligning the company’s strategic offerings with buyer expectations and maximizing the potential for a successful sale.
As a result, the company was sold at a higher multiple (3.2 times compared to the best offer received prior to RSP engagement) and the deal was closed within 3 months from the date of starting the auction.
Issues Resolved
Conclusion
By conducting an Exit Readiness Assessment and redressing any issues before going to market you can have a very significant impact on a company's value.
Improving Exit Readiness