Benchmark #1 Privately Held Mergers and Acquistions Advisors Worldwide

Value isn’t the only important component in a successful deal

Posted on March 11, 2014 By

The majority of our clients instruct Benchmark International with the task of generating the highest possible value for their company. Although this is our primary objective in any case, it is fully understandable that an outgoing business owner would wish to secure maximum value for what is possibly their most significant asset – it’s human nature, after all.

Our challenge is to convey the importance of those other deal factors which can have a considerable effect on value, monetary or otherwise.

The three deal factors of most importance to the overall success of a transaction are value, structure and the identifiable fit between the buyer and the company being sold.

It is often the case that sellers will value all three of these deal components equally after discussions around each with Benchmark International. Deal value really needs no explanation but the other two, particularly the variables involved in deal structure, are not always as obvious.

Creative structuring of a deal can significantly affect overall value and there are many different structures to suit a business owners’ objectives. A willingness on the part of an owner to continue with the company post-sale can open up a number of structuring possibilities, which can often substantially increase overall value. This scenario, as part of either on an ‘earn-out’ or on an employment contract basis, can give the buyer increased confidence and willingness to part with a greater overall sum as a result of improved continuity.

The fit between the buyer and the Company also represents an important factor in a deal. Business owners invest a great deal of time and effort to develop their company, often making personal sacrifices, and, as a result, it is important to ensure the company passes into new ownership with a clear understanding of the organisational culture and capabilities required to drive the company forward.  This helps to ensure the longevity of both the workforce and the company, more generally.

As you can see, a successful deal is more than just the most financially lucrative: it is one which represents the best balance between value, structure and buyer synergy. The balance between each of these factors is a subjective matter, however, and careful consideration of each should always be given before a deal can truly be considered a success.


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