At Beacon, we spend a substantial amount of time determining and discussing the value of a company. Valuation can be a complex process involving multiple calculations and interpretations. Despite the formulas and calculations, often there is a simple question in need of an answer in an acquisition transaction which is “Why?” As in, Why Would a Buyer Want to Buy the Company?
The answer can vary from a desire to obtain customers to a need to acquire intellectual property to complement of an existing product line. In a tight labor market, the value of acquiring an experienced team in place can significantly increase a company’s value in a sale. Conversely an aging workforce nearing retirement can decrease desirability and value.
Business owners focus on satisfying customer needs, retaining employees and making lots of money. They often don’t consider why their company might be attractive to a buyer, whether in the industry or outside.
When business owners and advisors discuss strategy for the future, be sure to spend a few minutes considering, Why? A good answer can exponentially change value in a transaction.