Situation: A company wants to create a liquidity event every 3-5 years. The objective is to increase shareholder value and also create opportunity for employees. How do you boost shareholder value and liquidity?
Advice from the CEOs:
- What are the important considerations in evaluating different options?
- Seek partners or investors with whom you have synergy and who will improve business prospects. There must be more than just their ability to provide cash.
- What is the role of key management and employees post deal? For how long?
- Are there timing aspects that help to maximize your own valuation? For example, if your business is cyclical, is there a time of the year when the financial picture is optimal?
- As you evaluate alternative deals, evaluate the M&A fees around each option. Could these funds be used differently with greater impact on liquidity?
- Technology spinoffs can increase liquidity while keeping the core company whole. Jack Stack describes this process in The Great Game of Business. This is also simpler and cleaner than many collaboration options.
- Considering collaborating with or purchasing a complimentary company with an office in a desirable geography.
- If an opportunity appears synergistic, dig to find the depth and value of the synergies.
- Consider timing options. Are there prerequisites which will increase probability of success?
- Roll-ups are doable but risky. It is hard to find examples that work. Challenges often come from of cultural issues and lack of compatibility.
- Look at the experience of similar companies as benchmarks for what you might anticipate from various options.