How can you master value creation to unlock growth?
July 27, 2017
It’s an increasing challenge facing many business owners and managers: your business may be performing well, but you feel it could be better - does it need new challenge or perspective to protect and build value?
Let’s look at it objectively. Will your current company activity increase EBITDA, or lead to a higher exit multiple on earnings? If the answer is “yes” to either of those, congratulations! It sounds as though you already have a Value Creation strategy in place. For those who answered “no” - or weren’t sure – why not take a fresh approach?
Tim Allen, PwC Partner and Deal Value Architect*, has nearly 20 years’ experience in driving change and delivering rapid, commercial and sustainable operational restructuring. Here he talks us through the key areas to consider.
Where does it all start?
Where does value creation actually begin in a company’s business cycle? Before you own the company.
It should be a fundamental part of the acquisition plan. That’s to say, potential buyers must firstly consider value drivers that will be most valuable to their current capital providers, but also which will be most valuable to a future buyer when they in-turn come to exit the business.
Will you focus on building new markets, new products, or market penetration? What will most attractive and valuable in five years to the next buyer?
How do I identify the drivers?
It’s important to ensure that you are fully using all the tools available to identify the potential value drivers and understand how these will be affected in the future.
For example, I focus on future trends, including what future buyers will want, using the insights provided from our large share of the M&A market. This provides a rapid evaluation of the relevancy and impact of different value drivers.
How can I bring it all together?
Lastly, it’s critical to understand the interdependency of value drivers. Linking a series of drivers together will frequently have an exponential impact on exit value.
For example, building a complementary digital proposition, with a subscription revenue stream, delivered via a lower cost operating model will be attractive to a different set of potential future bidders who may be willing to pay higher multiples than associated with the existing business model.
Hindsight is a wonderful thing and diligence easily highlights missed opportunities.
If you're interested in discussing how we can help work with you on a detailed rapid value creation review, which includes analysis of your value levers and assessment of options to identify upsides, please get in touch.
*Our Deal Value Architects have designed and overseen hundreds of successful deals, from developing the right strategy to ensuring that the deal is executed seamlessly. They support companies to implement changes that will deliver synergies and improvements long after the deal is signed.