M&A: To sell or to hold

Sometimes the simplest advice can glean the greatest rewards. To this end, I always start our consulting and M&A ventures with this mantra: look ahead. Envisioning the future is far wiser than pondering on the past. Outside of evaluating the last 12 months’ trends and what they may mean to you, any other reminiscing is a waste of time.

Selling should not be about timing the market

Everyone wants to know what the future will bring. But over my 40+ years in the business, I’ve learned that it’syou who brings your future. Your actions and innovations are what drive your organization. For better or worse, the things you do are the determinants of how you’ll succeed.

As we start the new decade, we’ve been contacted by numerous owners who are debating whether now is the time to sell. Borrowing rates are still low, there’s competition for acquisitions, and multiples remain attractive. But economic data portends that changes are looming. Selling should not just be about timing the market. This decision should be about achieving a goal that’s right for you. Even if your company is positioned to charge ahead, an owner might not be. Here are the top four considerations in deciding whether to sell or hold in 2020.

1. How do you feel about your business?

Having served as CEO of a number of notable organizations, I’ve learned that the cardinal rule of creating a great company is enjoying what you do. If you’re not having fun, none of your staff are either.

If everyone looks forward to each day, then it’s not ‘work’ but rather a chance to fulfill visions and accomplish new milestones (for both staff and clients). The satisfaction of running a company where employees come in energized every day and clients want to be part of the brand is invaluable.

If the opposite is true, then it’s time to revamp it or go. Think through the causes of your lack of fulfillment and evaluate whom it affects. Many owners can grow dispassionate about their businesses as they age and priorities change, even when they have a stellar business in hand. If it’s just you, you may wish to distribute/sell ownership stakes to management or operating family members. If dissention is widespread, it may be better to sell. In either scenario, don’t be afraid to make a move. With today’s low interest rates and available capital, you have plenty of options. There are many unique opportunities in selling, succession planning, family ownership distribution, and earnout plans that could be right for you. 

2. Are your company and people embracing change?

The label and packaging industry by nature is rife with innovation. But even in the most exciting venues, things can become mundane. Businesses can vary on their pioneering spirit or risk tolerance, and thus can get caught up in doing the same old thing, day in and out. 

As leaders in our industry, owners need to push change and provide guidance on how to proceed. More important, you need to take into account emerging trends, competitive products and entities, new technologies, and everything else that could affect the course of your business. With these insights, you will not only tap your greatest potential but also enjoy the significant energy and excitement that comes with being part of a growth organization.

3.  What’s the state of your management team?

You’ve worked hard to build a great brand for your business. If you leave, will your people be able to champion the business for the future? The strength of the (remaining) management team is always a factor – whether you’re selling to another entity or just making an exit.  

I always recommend that our clients review their executive line-up before making a decision on trajectory. Private companies often employ FOTOs (friends of the owner) or other discretionary staffers who aren’t actual drivers of the business. If you have too many of these, they may affect your value or future growth opportunities. Likewise, if you’re Mr or Ms Cronin, leaving Cronin Labels, you may want the legacy of your name brand protected. A solid leadership team is essential. 

4. How much are you willing to invest in the business this year?

Your customers expect you to be offering them the latest and greatest. To do so, you must be making continued capital investments, or you’ll risk falling behind. Dollars should be spent here with confidence and in clear alignment with your growth strategy. If you’re not sure about your plan or continued investment, it might be time to sell. 

Consider expert guidance as you make your choices. The Open Approach has orchestrated dozens of lucrative transactions and exits for label and packaging company owners. We’ve also helped owners stay put, and exceptionally positioned to achieve a greater, long-term vision. Having been there ourselves, we know the weight of your decision – and we know the relief of a path well-chosen. Whatever you decide, make sure you’re looking ahead.