E219: Unlocking True Business Value: Strategies and Insights for Mid-Market Sales w/ Trever Acers - Watch Here

About the Guest(s):

Trever Acers is an investment banking and valuation expert with over two decades of experience in the industry. He is part of Objective Investment Banking and Valuation, where he has been a key player for 15 years. Acers’ career began in strategy consulting, leading him through roles in technology, private equity, and ultimately landing him in investment banking. His expertise lies in representing sellers in the mid-market range, specifically dealing with companies valued between $20 million to $250 million.

Episode Summary:

In this episode of the How2Exit Podcast, host Ronald Skelton welcomes Trever Acers to discuss the intricacies of mid-market evaluations and the strategies for successful mergers and acquisitions. Acers, with his extensive background, shares insights on preparing businesses for sale and the importance of understanding a company's true value.

Beginning with Acers' journey from strategy consulting to investment banking, the conversation delves into the art of optimizing a business for the mid-market sale process. Acers emphasizes the need for businesses to be "buttoned up" and prepared for rigorous buyer scrutiny. With a focus on tailored strategies for business owners, he elucidates on the diverse industry experience required for a successful sale.

Key insights from the episode include how businesses can position themselves to be attractive to buyers and the importance of being strategic about company earnings and valuations. Acers advocates for an approach that aligns the seller's objectives with the process, ensuring not just a successful sale, but also a fulfilling one for all parties involved.

Key Takeaways:

• Valuation Prioritization: Acers highlights the significance of understanding and strategically presenting company valuations, focusing on synergies and future earnings potential for acquirers.

• Industry-Specific Expertise: The necessity of having departmentalized industry expertise within an investment firm is crucial to describe, value, and interact with potential buyers effectively.

• Aggressive Disqualification: Business owners must critically assess potential buyers early to avoid unnecessary costs and focus on those who are serious contenders.

• Deal Catalysts: Partnerships and relationships with other companies often act as catalysts for acquisitions, especially when there is an established rapport and understanding of potential synergies.

• Pre-Exit Strategic Actions: Business owners should consider engaging experts 2-3 years prior to a planned exit to strategize and significantly improve their outcomes.

Notable Quotes:

• "The only time we pursue sale is when it's like, wow, sale makes so much more sense than these other options because of all the unique factors that make us business owners, all the objectives that we have." – Trever Acers

• "You know, even in our, in our small business world, I always tell people if it's got more than two partners, I probably don't even want to chat with them." – Ronald Skelton

• "Humans perceive that if they perceive there's less risk there if they're familiar with you. And by less risk, that means they're willing to pay more." – Trever Acers

Article:

Navigating Mid-Market M&A: Strategies for Success in Business Transitions

The art of mastering mid-market mergers and acquisitions (M&A) is both nuanced and dynamic, requiring a blend of strategy, anticipation, and self-awareness. In a podcast with Ronald Skelton, Trever Acers, a seasoned expert with over two decades of experience, sheds light on the critical aspects of navigating successful business exits in the mid-market space. They delve into themes such as understanding buyer outreach, preparing for an optimal sale, and the introspective journey of identifying the true end goals of M&A.

Key takeaways:

• Change the Value Frame: Initiate value discussions that go beyond EBITDA and financials, focusing on synergies and quantifying potential post-acquisition gains.

• Aggressively Disqualify Buyers: Exercise discernment by qualifying buyer interest early to prevent resource wastage and protect business valuation.

• Plan Ahead Strategically: Engage with strategic potential buyers and industry experts several years prior to an anticipated sale for maximum impact on the outcome.

Reframing Valuation Beyond EBITDA: Capitalizing on Synergies

The traditional approach in M&A often emphasizes a business's EBITDA, creating a narrow view of valuation pegged to multiples of earnings. However, Acers advocates for a shift in perspective, urging sellers to discuss and expound on potential synergies with prospective buyers. This proactive stance not only enhances the value frame but also helps justify higher valuation premiums.

Acers mentions, "Change the frame. So the frame is, hey, tell us about your revenue...Instead of just talking about your EBITDA and sharing your financials, start a collaborative and partner-like conversation about how much money you're gonna make in the next three to five years together."

Identifying, quantifying, and validating synergies can offer buyers a logical justification for paying above standard market multiples. Discussing synergies covers more ground than projections of future growth, as it presents actionable insights and creates business plans that cater to the acquirer's strategy, ensuring a common understanding of the deal's potential.

The implications of this approach resonate beyond the negotiation table; they allow for a more honest and transparent dialogue about value, leading to mutually beneficial agreements. The seller's leverage in discussions increases when they articulate the unique advantages they bring and how these synergies can translate into tangible gains for the buyer.

Aggressive Disqualification: A Strategy to Protect Value and Focus

Acers introduces the concept of "aggressive disqualification," an imperative strategy for mid-market sellers receiving consistent interest from buyers. Instead of engaging with every inquiry, he suggests a selective approach to conserve resources and protect the company's value.

"Aggressively disqualify all of the incoming options," Acers advises. He further emphasizes that spending excessive time with acquirers "can suck millions of dollars" in shareholder value away from the primary business goals.

This methodology requires sellers to assess their business objectives and readiness for a sale from the outset. Accepting premature or unqualified offers can distract management, adversely affecting the company's performance and, ultimately, its market valuation. Business owners should be prepared to walk away from potential deals if they are not aligned with their strategic goals, a move that may seem counterintuitive but often leads to better outcomes.

The underlying strategic imperative for mid-market firms is to maintain a focused trajectory towards growth and efficiency, steering clear of unnecessitated detours prompted by external acquisition interests. This conserves both financial and operational resources for truly beneficial opportunities, leading to better valuation and sale conditions.

The Power of Long-Term Alignment and Relationship Building

Building a rapport with potential acquirers over time is not unique to small business sales—this principle also holds significant weight in the mid-market segment. Trever illustrates the benefits of long-term strategic engagement with buyers well ahead of an intended sale, a tactic that fosters familiarity, trust, and a willingness to pay a premium.

Signal to key strategic buyers an openness to collaboration and potential future transactions. This positions a business not merely as an acquisition target but as a partner with aligned goals and shared opportunities. Establishing such connections can culminate in not just a transaction but a transformation that optimally benefits both parties.

Acers relays a story of how partnering and building relationships often lead to acquisitions, "Humans perceive that if they perceive there's less risk there if they're familiar with you...they're willing to pay more."

Such strategic alignment mitigates the impersonal aspects of acquisition negotiations, instills confidence in the value exchange, and heightens the likelihood of a satisfactory sale. It also ensures alignment with operational cultures and visions—a match that can determine the tenability of a business post-acquisition.

As business owners contemplate future sales, the emphasis on establishing and nurturing strategic relationships cannot be overstated. This practice can translate to stronger acquisition propositions and, thus, a more lucrative and fitting business transition.

In his exchange with Ronald Skelton, Trever Acers presents a sophisticated understanding of the mid-market M&A arena. By reframing valuation metrics to emphasize collaborative financial benefits, aggressively qualifying incoming interest to maintain operational focus, and constructing enduring relationships with potential buyers, mid-market businesses can navigate what could otherwise be a tumultuous and treacherous process with confidence and clarity. Each of these strategies, woven with intention and insight, shapes a pathway that not only leads to better deal outcomes but preserves the legacy and integrity of the business at play.

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