Once a company has decided to sell or recapitalize the business, a whole new set of responsibilities, expectations, and time pressures appear that are different than normal business operations. In very short order, new strategies, fresh ideas, and renewed energy must be brought to the company to extract the most financially favorable end result. 

 
 
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What Investors Want

What do investors want to see in companies prior to recapitalization or acquisition?

  • Stable and predictable cash flow with reliable financial information
  • Scalable business potential
  • Leading market share or rapidly growing markets with strong growth potential 
  • Established brands and/or strong customer relationships with customer diversity
  • Strong sales and verifiable pipeline
  • Platforms with potential for expansion into new products, services, and technologies based on a strategic marketing plan
  • Strong position relative to competitors
  • Predictable EBITDA levels consistent or better than industry standards
  • Strong management teams interested in retaining an ownership stake
  • Potential for growth by up-selling to existing customers
  • Memorialized financial and operational company history (how deep are the roots?)
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Critical New Challenges

What added responsibilities does a company face during the recapitalization or acquisition stage?

  • High level of scrutiny and demands on employee time related to customers/customer relations, product, operations, financial systems, and employees, from outsiders, financial and otherwise
  • Need for internal secrecy/discretion to maintain morale, motivation, and acquire new employee talent
  • Need for external secrecy/discretion to maintain competitive position 
  • Increased executive attention to manage customer anxiety related to sale
  • Major time commitments from executive team, including current job responsibilities, reports, presentations, forecasting, and travel
  • Even greater focus on revenue/EBITDA/bottom line, constant demand for current revenue-related information and forecasts
  • With all eyes on the finish line, management credibility is impacted by focus on only short-term planning and investment strategy
  • Basic operations processes need to be running effectively and efficiently (no big problems!)
  • Potential employee dissatisfaction and turnover related to frozen benefits/opportunities/wages