15 Ways to Increase Your Microelectronics Company’s Value Before an Exit: Part Three
In Parts One and Two of our series, we covered “value drivers” related to team and culture, financial management, profitability and growth, and company leadership. In our third installment, we discuss practices that can help increase your company’s value while also supporting an easier transaction process.
7. Review your risk management plan, including legal, insurance and contracts review for transferability
Buyers are usually buying ROI vs Risk. Risk management is inherent in much of value creation – it’s a good business practice and it helps mitigate issues. Risks can be in the areas of legal, people, financial, marketing/competitive, technology, and/or operations. Do you have non-competes with your employees? Is your intellectual property documented? Do you have agreements with suppliers, customers, and employees? Events such as the global pandemic exposed deep vulnerabilities across industries. Should owners spend considerable time and effort preparing for these types of risks? While it’s hard to predict the future, you should prepare enough such that if a black swan event occurs, you have a plan to keep your business afloat. Two areas to focus on are insurance and legal. Always make sure your insurance coverage is complete and up to date. Additionally, take time to periodically review contracts and agreements to ensure that they are legal, enforceable, and transferable to a buyer.
8. “Clean up” the company in every way
Buyers will notice if you have kept up with investments in facilities, people, technology, and equipment. Upgrading equipment, investing in employee training and development, and taking steps to ensure facilities are well-maintained may be costly, but can greatly improve efficiency and productivity. Equipment upgrades should be tied to goals, such as improved sales and profitability. Facilities should appear clean and well-organized, especially the manufacturing area; keep up the parking lot and landscaping, paint the building, and maintain the interior to keep things comfortable and appealing. Additionally, as an owner, “clean up” the business to ensure that personal finances and business finances are separate. Many business owners engage in self-dealing – for example, over or under paying yourself or family members. Some of this can be addressed with addbacks. However, when putting the business on the market for sale, it is far better not to have to explain these things and hope you get full addback credit.
9. Be prepared and run a professional process
Buyers come to the table with deep transaction experience, while owners are often selling their business for the first time. How you go about selling your business can make a significant difference in your valuation and deal terms. Surrounding yourself with a professional team can help maximize your valuation and support a smooth transaction process; this team should include professionals with transaction experience, including a FINRA-licensed investment banker, transaction lawyer, tax professional, and/or accountant. An experienced, FINRA-licensed investment banker can help you through the process while you focus on running the business to its maximum. The sale process typically takes 6-12 months and during that time, it is critical that the business maintains its performance. If things falter during the process, buyers may want to renegotiate the price or worse yet, run for the hills. Engaging with professionals allows you to do what you do best – run your business.
The steps mentioned above and in our earlier installments have applications to a range of businesses in the PCB, PCBA, EMS, and others in the microelectronics sector. We are happy to share our insights with interested business owners at any time. To learn more, contact Paul Dickson, FOCUS Managing Director in Advanced Manufacturing and EMS/PCB Team Lead, at [email protected]