At Evolution Capital we are obsessed with unlocking hidden value. Why? Because buyers want to buy into potential. They are looking for companies that have a higher true value than the one being assigned to by the market or, in the case of private companies, by basic methodologies and multiple calculations.
Our approach to unlocking value in a business is unique in the sector and follows five key steps:
This is a key aspect of Evolution Capital’s ethos. We spend more hours on every stage of the sale process than the average adviser or broker. Every transaction we work on begins with a thorough strategic review and we are involved from the beginning right through to negotiating heads of terms, carrying out due diligence and handling the completion of the sale. It is this meticulous preparation that enables us to understand where the value is and how to unlock it.
Buyers want to invest in a growth story. Businesses need to develop a sound proposition and credible strategic agenda based on facts and figures, such as recurring revenue and gross profit, in order to entice the right buyers. Ultimately, cash flow is what sells.
A company needs to show it has good quality of earnings in order to attract the serious buyers. Whether it’s proof of long-term contracts or evidence of a loyal customer base, it is the quality of a company’s earnings that will make it stand out.
Companies should be able to generate an adjusted EBITDA based on expected post-sale performance derived from cost synergies, cross-selling opportunities and the expected growth in the customer base following a deal. Being able to project future earnings forward and quantify the growth dynamics of a business will help it achieve a premium valuation.
The quality of a company’s workforce is paramount when valuing a business. Often the synergies between two businesses will only benefit both parties if the working culture fits. We know our sector inside out, so we are experts at matching the right companies together.
Indeed, Evolution Capital tracks the value and performance of 5,000 company records in the sector. In an ever-changing landscape, we continuously assess changes in technology across the industry space to evaluate and determine the direction in which the sector is moving. By bench-marking key target companies and seeking out the fastest growing firms, we can highlight the companies that are investing in their future and have intrinsic value.
Gary Smith, Senior M&A Adviser at Evolution Capital, adds: “We can see the telecoms marketplace is consolidating and with new technologies emerging it is creating greater mid-market opportunities for acquisitions, funding and growth potential.”
It seems 2019 is a good time for those wanting to buy, sell or accelerate.