Newport Board Group, an Advisory Firm serving Middle Market Companies, Provides Guidance on the Importance of Transaction Preparation and Readiness

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How to Maximize the Results of a Corporate Transaction

Whether you’re directly approached by a potential acquirer or simply want to determine if your company might be a viable acquisition target by simply “testing the waters”, preparing for a deal is absolutely essential to achieving a positive outcome.

Today’s Merger and Acquisition market is red hot and almost half of the completed deals over the past few years have resulted from unsolicited offers. If you receive one of these overtures, would your company be ready?

Whether you’re directly approached by a potential acquirer or simply want to determine if your company might be a viable acquisition target by simply “testing the waters”, preparing for a deal is absolutely essential to achieving a positive outcome.

Effective preparation makes all the difference
It takes time, preparation and a realistic understanding of what’s required to become “transaction ready” – and selecting the right advisors to guide you along this path can make all the difference.

A holistic approach that integrates strategic, operational and financial perspectives to address the top drivers that create real company value and positively impact your company’s worth is essential to successfully prepare for a transaction. In addition, it’s important to engage advisors with executive operating capability paired with real-world transactional experience, both as sellers and buyers, who can provide well grounded, real-world advice. Newport partners deliver this type of personalized service by actually being the individuals on the ground working together with clients every step of the way – imparting the full breadth of knowledge and know-how. And, unlike other firms, Newport’s “Expert Network” enables our partners to effectively implement many of our proposed solutions to immediately increase a company’s valuation and potential for a successful transaction.

The 360-degree approach
Newport develops a 360-degree view of a business and focuses on how to optimize the company’s operations to build true business value and enhance its attractiveness to potential buyers. Think of Newport’s partners as a “quarterback” that’s always by your side. Our operating experience uniquely qualifies us to help companies overcome constraints (some of them perhaps self-imposed) to generate the necessary momentum required for performance improvement and transaction readiness. Newport also helps quarterback the “deal team” – aiding in recommending, selecting and managing the variety of important advisors – attorneys, accountants, investment bankers, valuation experts and wealth advisors – required to successfully complete a transaction.

Why is “transaction readiness” critically important?
Despite the significant amount of “dry powder” (available financial capital) currently chasing deals, due diligence requirements are more robust than ever. Any company seeking to exit must be extremely well prepared to pass the diligence process and protect against the buyer obtaining leverage to reduce the sales price or even abandon the deal. Unfortunately, many companies fail to prepare for this intense diligence, nor provide enough time to identify and remedy problems. Effective preparation IS the difference in achieving higher valuations and increasing the likelihood that a deal for a company will ultimately succeed.

Because most entrepreneurs and companies rarely experience a transaction process, the ground-level experience of Newport partners is fundamental in knowing how to build business value in the main areas important to increasing a company’s worth to potential buyers. Our partners are particularly adept at identifying and shoring up specific diligence areas to achieve rapid, incremental performance gains and higher valuations.

The “Transaction Readiness Assessment”
Often, 80% or more of a business owner’s wealth is tied up in the company and essentially functions as the family’s retirement plan. In order to protect that hard-earned wealth and retire comfortably, “baby boomers” in particular must act quickly to take advantage of this robust M&A market. They will not likely have the ability to ride out another economic cycle to seek a second chance at exiting at such high valuations. But for any business, once a potential buyer’s due diligence team arrives at the door, it’s too late to try and build additional value or plug any “holes” without negative consequences for a pending deal.

Because the exit / transaction process is complex and one that a typical business owner has rarely experienced, Newport’s proprietary “Transaction Readiness Assessment” can help bridge the knowledge gap and lead to a more realistic assessment of a company’s deal-ready status. Our hands-on check-up requires only a limited commitment of time and company resources. The end result provides a tangible and valuable “road map” by which to navigate the transaction preparation process – including timelines and methods for addressing key value drivers having the most effect on achieving a successful deal. Even if a transaction is not currently contemplated or doesn’t occur, our “Transaction Readiness Assessment” identifies crucial focus areas within a company that, when effectively addressed, can substantially increase the overall value of the company going forward.

Newport’s battle-tested former C-level executives are uniquely skilled at readying owners, CEOs and their teams to effectively prepare for a successful sale. Our partners are deeply experienced at completing transactions with highly favorable terms for the seller and, collectively, we’ve shepherded hundreds of deals successfully across the finish line. Undertaking a “Transaction Readiness Assessment” is a key initial step in the process.

Barry Selvidge is a partner in the Atlanta office of Newport Board Group.

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