About Guest Blogger, Matt Roberts: Matt is an Associate at MelCap Partners, LLC, a middle market investment banking firm, where he focuses on M&A transactions. MelCap Partners helps companies in the following three areas: M&A advisory, capital raising (equity or debt), and other advisory work such as valuations or feasibility studies. Prior to MelCap, he spent several years in management consulting and accounting roles.
At MelCap Partners, we are a specialized investment banking firm that advises business owners in mergers and acquisition transactions. Over the next couple months, we would like to dive into some business issues that can have an impact on an M&A transaction. Below we’ll explore management bench strength, how it affects value, and things to consider before selling a business.
What Do We Mean By Bench Strength?
In an M&A transaction, especially in the lower middle market ($10—$250 million in sales), the strength of the management team will influence a buyer’s risk analysis of the company. Analyzing management’s strength and the owner’s importance helps a buyer understand the capabilities (or lack thereof) of the management team, and help the buyer assess if the company is a quality acquisition target. The make-up of the management team can have a significant effect on the outcome of a sale transaction and a managerial succession plan is something that all owners should think about before pursuing a successful transaction.
Three Things to Consider Before Selling Your Business
How much longer do you want to run your company? Planning now will allow you to successfully transition and either build a management team or find a buyer that can assist with the growth of the business.
What does your current management team look like? Are there capabilities that you want to add or replace before selling? Are there competencies or duties that you have and your management team lacks?
It is important to consider what type of buyer would be optimal for your business. If you want to exit the business without a management team, a strategic buyer in your industry or a financial buyer with operational partners might be a great fit.