Market Intelligence: M&A in Wide-Format Digital
Are you looking to enter the wide-format market? You have three options, but which one is best for you?
- Look for a clean bill of health. Make sure the company you are thinking of acquiring resolve any accounts payable or real estate/environmental issues. Any pending litigation needs to be settled too. Buyers don’t want to invest in these kinds of headaches, failure to close these issues out will result in a lower price for the business.
- Staging the business. Realtors use “home staging” to present a home in its best possible light. Sellers often should and do employ the same principle, cleaning out anything that’s non-operational or doesn’t contribute directly to the bottom line. Business buyers are generally looking for three things when investing in a business; income, assets, and marketing opportunity, so sellers should be prepared to position their businesses to address these needs. Buyers should look for the kind of equipment and space that can be used for production or expansion.
- First impressions are lasting impressions. Whether you are the buyer or the seller, first impressions count, so put your best foot forward. Your entire company should be dressed for success. Your key employees, your brand, your facility, your website, and your reputation should all reflect professionalism, focus, class, and excellence.
- Win-win. Try and structure a win-win deal. Think about a scenario where both the seller and the buyer will prosper. As a wide format business owner/operator, one of your best assets and keys to building your signage and graphics business may have been your ability to build sales relationships. The seller needs to be prepared to hand over some of those relationships, and even use the sale of the business as marketing tool to help grow. Positioning the sale as offering the opportunity to service the account better (maybe because of redundancy or infrastructure, etc) . The buyer will need to envision growth to consider the investment!
- Keep clear and concise financial statements. Acquisition targets should have 3-5 years of financial statements. Ideally these would be audited, but at the minimum both parties should have a CPA review them.
- Don’t go it alone. By nature, most entrepreneurs are do-it-yourselfers. Unfortunately, the merger and acquisition process has too many moving parts to tackle solo. Try to find and develop relationships with people who have traveled down this road before.
- The deal doesn’t stop with a letter of intent. Don’t forget that these types of sales usually include a 2-3 year transitional process from concept to completion.
- Prepare for post-closing issues. The deal is done, but you are not. There is a myriad of post-closing issues. Remember, in most cases, no one but the buyer and the seller know about the sale. Think and plan about how your customers, employees, suppliers, and the overall industry will react when they hear the news. You’ll need to work to ensure a smooth transition. Remember, you’re guaranteed to win if everyone wins.
These are very interesting times we’re living in the wide-format signage and graphics market. The segment seems healthy which InfoTrends expects to drive merger and acquisition activity in this segment because effectively competing in the signage and graphics market does require some expertise. Whether you are buying or selling, recognition and valuation of the skills you have or the skills you’ll need to effectively compete and grow in this segment should be an important part of the equation.
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