Growing in the Shadows
I turned down a prospect the other day.
The owner of a small company reached out for assistance in marketing his firm to a group of potential acquirers. We aren’t brokers, of course, but we do offer pre-sale positioning programs; essentially, corporate marketing efforts that raise client profiles and valuations with targeted buyers.
As we discussed the various details, though, it became clear that the company in question is several steps away from the kind of valuation the ownership team is seeking.
As the company exists today, any buyer will discount an offering price to reflect the warts and blemishes that the buyer will need to remove after the close. That discount will incorporate the buyer’s perception of risk, including the perception that the company will still not live up to its promise even after the corrections are made.
As a result, I noted, the company is less likely to find buyers, less likely to receive multiple offers, and less likely to command the type of valuation the ownership group is seeking for its exit.
We could begin our marketing now, of course, but I suggested that the more profitable approach is to keep a low profile, catalog the issues that would reduce buyers’ interest, and cure those failings outside of the limelight. Then, with the company’s performance and stability strengthened, we could begin the pre-sale positioning process.
By delaying our start, we could present a stronger, more profitable, less risky investment to our targeted buyers. We could demonstrate that the management team has the ability to recognize and resolve issues that would limit enterprise value. We could, quite simply, turn on the spotlight when we would be illuminating a prize.
He’s an entrepreneur, though, and it has taken him a long time to get to the state of mind he has today. Having arrived, he wants to move now. Maybe things will work out for him.
Maybe.
About Michael Rosenbaum
Quadrant Five founder Michael Rosenbaum has walked the walk when it comes to building a business, so he can be a confidant and compatriot—not just an advisor—for clients. Rosenbaum worked his way up to president of a $35 million company with 300 people and 600 clients. Along the way, he managed operations, HR, IT, and marketing, and advised CEOS and CFOs at more than 200 companies.
Beginning as a newspaper reporter, he developed a specialization in business journalism and earned an MBA on his way to a 30-year consulting career. Representing both angel-backed startups and Fortune 100 giants, Rosenbaum identified the patterns and processes that drive success across a wide range of industries and business cycles.
He is well regarded for designing each performance-improvement process around specific client needs, capabilities, and culture, rather than pushing a pre-fab set of rules for clients to follow. He brings a unique set of skills to each engagement, including experiences as a company president, financial journalist, marketer, IR advisor, non-profit founder, author, and public speaker. Items of note include:
• Received the Order of Merit of the Republic of Poland in 2015 for non-profit work
• Honored for the Best Business Biography of 2012 for his fifth book, Six Tires, No Plan
• Frequent speaker on customer relationship value
• Sales instructor for Certified Value Growth Advisor certification program.
• Regional Communications Chair, YPO Gold
• Marketing Chair, AMAA’s Mid-Market Alliance
• Former Chicago Chapter Chair, National Association of Corporate Directors
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