Truck News

News

M&A Insights: Become a four-tool player to maximize company valuation

It’s said in baseball that you can be a five-tool player: throw, run, field, hit, and hit with power, and that gets you a reward: a higher salary.


It’s said in baseball that you can be a five-tool player: throw, run, field, hit, and hit with power, and that gets you a reward: a higher salary.

Likewise, in M&A there are four “tool players”: add-on, add-on between $25-50 million in revenues, above-average performer, and management-in-place. These four tools get you a reward: a higher value when you sell.

Add-ons typically cover a new product, geography or customer base, and when that add-on sits in the $25-50 million sweet spot, investors pay a premium. Why? Private equity investors look for a company to fill a gap, and size matters. When you have investors seeking a very specific company size, the laws of supply and demand dictate the price.

Above-average performing companies generally carry a price premium too, regardless of size. When you then factor in a solid, consistent management team, it’s not hard to see why premiums are paid for companies that feature all four attributes.

How can you qualify for an M&A reward? Planning ahead with these four categories in mind is a start.

If your total enterprise value is lower than $25 million, put a game plan in motion to grow it. If you are planning to retire, think about staying on a while to provide consistent leadership before stepping aside; alternatively, ensure you have a strong management team in place that functions well in your absence. A few smart maneuvers now can translate to millions later.

– Doug Nix is vice chairman of Corporate Finance Associates. For more information, visit www.cfaw.ca.


Truck News

Truck News

Truck News is Canada's leading trucking newspaper - news and information for trucking companies, owner/operators, truck drivers and logistics professionals working in the Canadian trucking industry.
All posts by

Print this page
Related Articles
TruckNews
TodaysTrucking


Have your say:

Your email address will not be published. Required fields are marked *

*