Many firms are currently conflicted. In the middle of the COVID Era, with no known end data, these companies are asking themselves a basic question: do we go to market now? This question is germane to many firms, whether COVID has helped or harmed them.
Who knows how to advise these potential sellers? For our investment bank, we listen to the prospect to gauge the following:
- Is there a clear, concise story surrounding the improved or diminished value of the business? And, is there enough of a market of potential buyers that a deal can be done?
- Can the prospective seller document the specific impact of COVID on their financial state? This reflection should focus on pre and post COVID changes in revenue, pivoting to new products, margins, labor and facility costs, etc. In order words, the detailed storyboard should contain answers to the obvious and not so obvious questions from buyer candidates.
- For the troubled company, even one considering bankruptcy, how long can they survive? Can they still be an add-on to another company? Do they have IP, customers, or some unique asset that can be sold separate from the business?
- The unanswered question remains. For several prospects, we have been retained to perform a preliminary advisory study to “test the market.” This strategic analysis involves the following:
- Preliminary business value based on market multiples and adjusted EBITDA.
- Development of a Teaser with the company highlights and story.
- Initial designation of the most likely buyers.
- A “no-names” outreach to test the level of interest.
- If the answers to the above steps in positive, present the prospect with a retainer agreement to proceed to market.