The most straightforward indicator of a company’s success is the value it generates to its shareholders. The value of an unlisted company is always uncertain until selling: according to the laws of the market economy, the true value of a company is the ultimate exit value.
If you intend to exit or list your growing company, it is a good idea to involve a minority investor to support growth since, as a co-entrepreneur, the investor wants to maximise the company’s value and knows how to do it.
A strategic value creation plan is always based on the owners’ goals, i.e. the ownership strategy. The strategy determines the intended time of selling or listing the company (if this is the intention) and the targeted value increase. It is also advisable for the owners to determine the company’s values and purpose – reason for existence. By considering these aspects you can lay a solid foundation for strategy work, leadership, growth and success.
The values and purpose create a basis for strategy work and establish the framework for the company’s identity. The strategy determines the goal (for example: the desired size category/market/position in five years) and outlines the strategic measures and indicators that will lead to achieving it.
In preparing a strategy, it is important to choose the company’s specific area of focus, i.e. the business we are in, and the business we are not in. The valuation of a generic business without its own DNA is rarely high. The best value creation stories have stemmed from a strong focus, ambitious goals and systematic work.
The strategy is formed by strategic programmes, “Must-Win Battles”, that drive the company towards its goals. The MWBs must be meaningful, specifically defined and inspiring, and they should have a person in charge, indicators and schedules to steer their management. MWBs are owned at the management group level, and the Board of Directors uses them to monitor the fulfilment of the strategy.
M&A is one area of strategic growth. When planning acquisitions, it is a good idea to involve professional advisors, because the processes are complex and few entrepreneurs have the insight and experience provided by hundreds of transactions. Professionals increase the probability of success and are likely to make a better deal. With them the structure of the transaction is better, the process smoother, the schedules more accurate and the risks manageable. When successful, an acquisition is an effective way to increase the company’s value in one go.
It is good to bear in mind that even high-quality strategy work is worthless without competent leadership that inspires and engages the entire organisation. With regard to acquisitions, too, it is important to remember that an understanding of the culture of both companies, appreciating competence, listening to employees and leadership are key elements for a successful integration phase of an acquisition. You should also keep the principles of responsibility clear in your mind to ensure up-to-date and sustainable value increase. Involving a responsible growth investor in the efforts is also helpful in this regard.
Statistics show that the most impressive exits are carried out with M&A professionals in the team. Exits are often built years before the planned moment by considering the company’s strategy and market position, polishing the story and verifying the numbers. The value for various buyer profiles is built systematically, which ensures that the exit process involves the desired buyer candidates. This provides the most suitable new home for the company – and the highest sale price.