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June 2017

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« End of Year Thoughts | Main | Black Swans and the Future »

Strategic planning is the key to “Big Ticket” acquisitions and divestitures

The days of the financial buyer seem so long ago. Just asking for the going multiple or just overpaying appears to be from a “by-gone” era in the beverage industry. There is too much at risk.

What is a realistic acquisition cost or a fair selling price? It depends....on who you are; how you organize your operation; and your portfolio mix.

How can that be? Because things are more complicated...period. The levels of financial analyses and strategic business planning needed to succeed in either transferring a brand(s) or acquiring a company AND running a profitable operation continues to escalate as the industry evolves.

For the great deals, both parties are mentally in sync and on top of their financial and operating game planning.

For the prospective buyer, it starts with a vision!

Properly evaluating a company’s current financial performance and understanding how to achieve operating synergy are fundamental to identifying the opportunity and accurately projecting future performance. Many times company’s potential to leverage economies of scale and/or capitalize on the vertical integration opportunities factors heavily for the strategic buyer when acquiring either brands or operations. Paying an “affordable” premium is individual to the unique situation of seller.

It has been our experience that these premiums are easily justified based on thorough financial and company analyses. These preliminary analyses normally include evaluating current organization structure, staffing requirements, gross profit contribution by brand, business systems and operations work flows.

For the potential seller, identifying the strategic benefits and the financial capabilities of the prospective buyers along with developing some financial sensitivity of the prospects “go-to” operations goes a long way. The affordability index for each buying prospect is as diverse as the acquisition candidates.

Give John and I a call if you would like to discuss in strictest confidence your needs and answer any questions regarding your company’s plans for the New Year.

We wish you the best during this Holiday Season.

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