Far too many business owners overreact when they hear rumors of a potential recession, and far too often put their exit plans on hold only to regret doing so because they are often a year or more behind the next seller’s market when it hits. And this will especially be the case this time around as most economists predict it will be a very mild recession in 2023.
The reality is that companies are bought and sold no matter what economic rumors, trembles and rumblings are voiced by the pundits.
If you have a plan, it is vital to stick with it.
A really good example of “why” is Masonite. A recent article in The Middle Market’s online magazine explained it this way:
Despite inflation eating into consumers’ wallets, people continue to spend money on their homes. Masonite International Corp. (NYSE: DOOR), a maker and seller of doors, recently acquired Endura Products, a manufacturer of door frames and other door parts.
Masonite CFO Russ Tiejema explained the company’s acquisition and the company’s M&A strategy this way: “We’ve laid out in the last couple of years a new strategy for the business. We’ve been very much like a traditional building products company. Our business has historically been the door slab itself. We set out a strategy where we’re looking to address a broader part of the market and that market would be selling more door systems as opposed to just door slabs.”
Although the current economic rumor climate may push some buyers to the sidelines, Masonite is sticking with its M&A plan. “You can make a case that there are times when you don’t want to do M&A because it’s not a good economic time, but if the asset is strategically enough aligned with what you’re trying to accomplish and it’s only going to be available at that particular time, that’s when you execute the transaction,” Tiejema says. “I would argue that Endura is a little bit in that case. If it’s the right asset at the right price for the strategic aspect of the business, you move ahead. And that’s what we’ve done.”
So, you need to consider your business as an investment and think about it the way professional buyers do that have a plan. First, you need to create one. Secondly, stick with it. Finally, conclude it with a buyer that is of the same strategic mindset.
Of course, the crucial first step is creating an exit plan that matches your financial and personal goals. Your plan could be to finalize it a year from now or five years hence. Either way you need a plan that does two things: Develops accelerated value creation strategies and then, once in place, finds buyers that see the value in your strategic assets (and even the non-tangible assets).
Now you can do this alone, lots of business owners do, but many realize a few years later that they left chips on the table because they allowed a professional buyer to undervalue their entity. Or you can hire an M&A team to work with you on your journey and help culminate it in your best interests no matter what economic climate we may be in. In 2022, Generational was recognized by The M&A Advisor with several awards including:
Now these two awards are significant because they are peer awards, meaning our peers (competitors) in our industry recognize the significant work we do and because it shows our track record of success is no accident.
So, follow the lead of Masonite: Develop an exit plan, stick with it, and finish it grandly!
For more information about how Generational can help you do so, please look at the following links:
Carl Doerksen is the Director of Corporate Development at Generational Equity.
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