Tampa, FL, June 08, 2018 --(PR.com
)-- Benchmark International’s perspective is what makes them different. They always put their clients first and strive to get the highest value for their business. To accomplish that goal, they must also keep in mind the buyside perspective.
Buyers look at companies differently than sellers and some advisors. Certainly, a company’s financials are a common barometer for both sides to gage a company’s performance and success. And cultural fit is a must. Beyond those metrics; however, buyers prioritize characteristics to mitigate investment risk. These characteristics include, scalability, stability, resiliency, and the ability to grow.
Scalability is about a company’s ability to accommodate growth – to behave as a larger entity. Some acquisitions result in smaller companies becoming part of much larger organizations. The new structure sometimes brings new processes, systems, and reporting requirements. These changes in scale can introduce risk if personnel lack the bandwidth, appetite, skills, or resources to ramp up. Buyers seek assurance that the team is adaptable and capable of scaling.
Many investors also seek stability. The project-based business with wild swings in revenues or heavy seasonality, for example, presents significant challenges in performance, planning, and execution. For most investors, consistency is vital and this is often tied to a company’s revenue model. This is a key reason why buyers prefer recurring revenue models. For industrial services businesses, long-term or preventive maintenance contracts provide recurring revenue. Many equipment manufacturers have transitioned to providing a service rather than hardware. For example, some compressor manufacturers retain the physical asset and provide an “air as a service” guarantee for a monthly fee. And software companies achieve this by transitioning to a subscription, or software as a service (SaaS) model.
Together with a “sticky” customer base – high switching costs or risk – these all provide a level of revenue stability that might otherwise be absent. For resiliency, buyers seek an ability to weather the storm of downward market fluctuations. How did the company fare in prior cycles; did their performance mirror these fluctuations or was it unnoticed? Certainly, a company’s ability to quickly adapt is key. Construction and oil & gas companies that quickly shifted resources and focus in recent downturns reduced their impact. However, what’s also important is diversification.
To read the full coverage of this topic, Benchmark International invites readers to visit their blog where mergers and acquisitions news and trends are covered in depth.