Posts made in February 2015

Strong PR program can boost selling price for firm

 

BUSINESS

By Gary Miller GEM Strategy Management

Posted:   02/22/2015 12:01:00 AM MST

Owners preparing for the sale of a company need to start planning three to five years before they actually go to market — and this includes creating a strong public relations program.

PR is often overlooked, even though its benefits help burnish and elevate a company’s brand within the trade and among customers, employees, competitors, suppliers and the community. This higher profile also can help put a seller in a more powerful position when negotiating a sale and attract more interest from potential buyers and investors.

Because the media and investment community are likely to be indifferent to early efforts, the company must approach the problem by exploiting its strengths.

Social media and a robust website can offset much of the difficulty in trying to reach stakeholders and target audiences.

Most small companies tend to shape communications programs to say what management wants to hear rather than addressing the needs or interests of their target audiences. But a company looking for a buyer should think like a buyer as it crafts its public image.

Most buyers are looking for similar information about a company. Three critical items come to mind: management bench strength, sustainable competitive advantage and future growth potential.

They want to know about the company’s products and services and the prospects of new products coming to market. They want to know about company-customer success stories, product success stories and expansion and growth plans. In short, buyers want to know as much as possible about tangible and intangible assets.

Companies large and small tend to present themselves in company news releases and publications with restraint. They hold back important information for “competitive reasons.” However, companies actually can craft their messages to avoid “giving away the store.”

One of the best sources of visibility for a small company is not the company’s activities, but the character and quality of the company’s management. A good place to begin is to focus on management successes. Such stories attract the interest of potential buyers and the investment community and make the company more visible because of the “human interest” aspect of success.

These management stories should be shaped to convey information of value. They should illustrate management’s abilities; for example, discussing how management solved a problem in a new or more effective way.

An article concerning management’s problem-solving ability can be submitted with a byline to many trade and/or general business publications. It also is possible to interest a reporter in developing such a story on his or her own. Any stories published should be reprinted and distributed to a wide audience, including past, present and potential customers, manufacturers, the financial community, suppliers, distributors, employees and, yes, competitors.

A second place to focus is general “media relations.” There are numerous opportunities for companies of all sizes to obtain considerable visibility in the media.

The process takes time and effort but almost always pays off. The biggest problem for inexperienced companies is dealing with reporters. This is generally true because most businessmen and women forget the reporter has a job to do, too. The reporter is looking for “news,” and most corporate stories, at least the first time they are pitched, often aren’t newsworthy to anyone other than the company itself.

The solution is to think like a reporter. Try to identify items of interest at your company, even though they may not be central to the business. Provide an interesting lead or idea and the reporter will flesh out the story.

Identify the correct publications to contact. One publication is certainly your daily newspaper. Local business reporters are always looking for new story leads — particularly about local companies.

A third place to focus is “public service.” Initially, this may seem remote from mergers and acquisitions. But it has been demonstrated repeatedly that the company benefits when management uses its business skills to contribute to the community.

A public service position or appointment, to a nonprofit board, for example, provides a base for additional visibility for the company’s individual members and, by association, for the company.

A fourth place to focus is offering to be a speaker. Speeches on virtually any subject will increase management’s visibility and can be reprinted for distribution. Testimony before governmental agencies also can boost management’s profile.

Whatever activities a small company undertakes, work should begin well in advance of efforts to sell the company. And whether or not the public relations plan results in selling the company, there will be long-range benefits, including improving reputation and visibility among employees, customers and the community at large.

Gary Miller is founder and CEO of GEM Strategy Management Inc., a national firm focusing on strategic planning, raising growth capital, M&A, planning exit strategies, preparing companies for sale and post-integration processes for middle-market companies. Reach Gary at 970.390.4441 or gmiller@ gemstrategymanagement.com.

 

Capital is critical for company growth

Gary Miller

THE ARIZONA REPUBLIC

PAGE E2 || SUNDAY, February 15, 2015

by Gary Miller CEO, GEM Strategy Management, Inc.

Lacking sufficient capital to grow is the major constraint for most small and middle market companies. To reach the next level of success, capital is the fuel that drives the company’s growth engine. Without it, reaching that “next level” is almost impossible. Many entrepreneurs are skilled at starting and building small successful companies. But growing a small company into a big one is very different, and in many ways, a more difficult task which is why raising growth capital is so important. Entrepreneurs and business owners often stumble in obtaining growth capital because they are inexperienced and unprepared.

Prepare your company to raise capital. Hire an experienced management consulting firm to help you prepare your company and to help you raise the capital. Raising capital means seeking investors whether it is debt equity through a bank loan or investor equity through an investment firm. To prepare for either choice, (a) clean up your books and records, (b) prepare for due diligence, (c) update your strategic business plan, (d) detail how much capital is needed including its purpose and uses, (e) plan the optimal deal structure (lean on your consultant for help).

Develop detailed growth and expansion plans . Prepare detailed financial Pro Formas showing monthly income and expenses. Institutional investors look to invest in companies that have a clear differentiation, scalability, execution capabilities, and a great management team. Your growth plans must be “creative and strategic”. Consider forming a Joint Venture/Strategic Partnerships or Strategic Alliances with your customers, vendors or competitors.

Hire a valuation company to render a “Market Valuation” opinion. Don’t expect sky-high valuations entrepreneurial companies enjoyed in the past. Investors have returned to ground level and realize that many of their investments will not qualify for an initial public offering twelve to 24 months later. Therefore, be prepared to give up more ownership for smaller amounts of capital and possibly even more control if you need to raise equity capital.

Prepare a “leave behind” presentation . Prepare marketing materials such as an executive summary, management presentation and due diligence materials. Your knowledge, confidence, experience, track record, commitment and enthusiasm are critical components to your success. Practice the presentation. Know your numbers! First, decide if you are willing to give up some equity and some control of your business. If not, then your options may be limited. The path you will then follow is to seek debt financing/debt equity through a variety of sources: (1) Small Business Administration (SBA) loan programs have significantly expanded over the last decade ranging from loan program guarantees to women’s business centers; (2) asset based lenders (ABLs); (3) factoring companies; (4) mezzanine financing companies (a hybrid of debt and equity); (5) self-funding (second mortgage on your home; IRAs and 401Ks); (6) friends and family; (7) banks (revolving lines of credit and structured financing); (8) small business investment companies (SBICs); (9) business incubators; (10) peer to peer lending/investing; (11) OFIs (Other Financial Institutions i.e. GE Capital); and, insurance companies.

If you are willing to give up some equity and some control of the business, then your options expand significantly and you can follow both paths of debt equity and investor equity. I tell our clients let’s look at a variety of sources: (1) angel/ super angel investors; (2) high and super high net worth individuals; (3) family offices; (4) venture capitalist; (5) private equity firms; (6) investment bankers; (7) merchant bankers; (8) crowd funding; (9) joint ventures/partnerships/alliances; and, (10) SBA venture capital programs. Make no mistake about it; plenty of growth capital sources are waiting for the right opportunity. However, there is a price to pay and a cost to bear for growth capital. Expected returns vary significantly depending on the source of capital. The cost of capital is considerably higher for privately held companies than for listed public companies. Investors in this space are seeking high returns (see graph below). I tell clients, it is best to raise capital when you can, not when you need it. It doesn’t matter who the capital sources are, if you’re desperate for funds, they will smell it a mile away. Your chances of success will be reduced significantly if you are playing with a weak hand. The best institutional investors act as partners. They bring in other investors, open doors for business development, help in recruiting, act like coaches, are objective in their advice as your company grows, and guide you through the inevitable difficult times. Choose your source wisely. Match your choice to your goals. Be aggressive, creative and persistent and develop the ability to convince others to buy into your vision and share your dream on a foundation of substance, trust and integrity. Remember, growth is the greatest driver of enterprise value.

Gary Miller (gmiller@gemstrategymanagement.com ) is founder and CEO of GEM Strategy Management Inc., a M&A management consulting firm focusing on strategic business planning, growth capital for expansion, mergers and acquisitions, value creation, merger integration, and exit strategies for middle-market company owners. You can reach Gary at www.gemstrategymanagement.com or 970.390.4441

Strategies for Landing on Your Feet after a Merger

KWG PHOTO-1 2013by Kathleen Winsor-Games, senior consultant, GEM Strategy Management, Inc.

A merger or acquisition of your company has been announced, and you’re wondering, “Is my job safe?”

Whether you are with the acquiring company, the acquired company, or part of a merger of equals, don’t make the mistake of thinking your job is safe. From the day the transaction is announced to the day major changes are made within your company, you have a brief period of time to take action on your behalf.

Knowledge is Power – If you don’t have a clear understanding of your industry, including dominant players, emerging companies, economic trends, and recent innovations, now is the time to come up to speed. Gain insight into the financial drivers that led to the merger or acquisition in the first place. Understanding those financial drivers is one key to unraveling the mystery of whether or not you have a role to play once the integration phase begins.

Here are some questions you can ask yourself to better understand how to position yourself moving forward:

  • Is your company making the acquisition or were they acquired?
  • Was it a merger of equals with complementary products?
  • Does one company have market share in one desirable market demographic, but not another?
  • Does the acquisition appear to be driven by the need to acquire technology or in-demand expertise that is already in place?
  • What does one company have that the other does not?

Perhaps one company has a loyal customer base that would have taken another company many years to achieve. Perhaps the other has successfully implemented the latest manufacturing technologies, positioning them to launch new products in a shorter window of opportunity compared to competitors.

Now you must determine what your role is relative to these factors. For instance, if you were involved in the initiative to select and implement new manufacturing technology, you may be positioned to lead team members in the newly merged company. On the other hand, if your company is the one with the outdated technology, update your skills immediately and identify new ways to contribute, or, take action to find a role in another company.

Hope is not a Strategy – Don’t ignore signs of an impending layoff or signal resistance to change. You may be swept up in a layoff without a smart career strategy and with no place to land. Listen carefully for indicators on how the new culture and integration will be handled and manage your strategy accordingly.

If management is paying attention to how the cultures will be integrated, and employee communication efforts are frequent and encouraging, take heart, but dig deeper. Find out if words and actions match. Are you being offered a retention bonus? Will it be worthwhile to stay, or could it damage your career long-term? Is your boss evasive about meeting with you or reluctant to identify a new role for you?

Here is where you must read between the lines to learn where you truly stand, and to see whether the new culture, the merged entity, and your career path can happily converge.

Solidify Your Alliances –  Are you on good terms with your boss and your colleagues? How is your visibility and reputation with senior management? If you are not in good standing, now is probably not the best time to mend fences. Instead, focus on the positive work you can do to facilitate the transition and put up any wins you can in the near term, while working on your exit strategy. Do everything in your power to ensure that your exit leaves a positive impression and that you can point to accomplishments that build bridges to the next opportunity.

Meanwhile, think carefully about who your true career champions are and quietly reach out to those trusted colleagues for insight and support. Be willing to do the same for others wherever possible. Keep your initial conversations focused on the concept of forging new relationships and brainstorming about emerging companies that hire people like you, while resisting the urge to ask for direct job leads. The idea is to re-ignite your network, expand your visibility and identify opportunities in their earliest stages.

If the newly merged culture is in disarray or a high degree of mistrust exists, don’t wait around and hope for things to get better. Start reaching out to your external relationships and network quietly to identify new opportunities.

Refresh Your Self-Marketing – Document your accomplishments and integrate your best success stories in your LinkedIn profile and resume. Re-engage your professional relationships that may be stale.

The bottom line is to move in the direction that best aligns with your personal values, professional strengths, and long-term goals. You may find new opportunity and upside in your recently reconfigured company, but if not, take the steps to ensure you are in a position of choice.

Kathleen Windsor-Games is a senior consultant to GEM Strategy Management. 970.390.4441