M&A and Capital Firms Benefit from Partnering with Turnaround Consulting Partners

Business Need versus Qualification

In the course of the life of a business, events create situations where they must approach outside experts to help them sell or obtain funding to grow. Unfortunately, these described businesses often don’t get a second look from these specialized firms because the business is not ready or qualified for that next step. This is a frustrating situation for the company as they are often unable to move forward because of their performance history.

The Client Challenges for M&A and Capital Firms

On the flip side of the coin, Merger and Acquisition firms that I am in contact with have a long list of potential customers seeking their help in selling their business. Unfortunately, they typically state that few of those candidates are in good enough financial and operational shape where they would justify an acceptable price for the seller.

The common problems the businesses face are low margins, aging product lines, poor sales and operational practices plus poor balance sheets. Often adding to this list is that the business has not developed a leadership team that has absorbed all of the knowledge necessary to successfully run and grow the business after the owner’s departure.

Given these conditions, there is little for the M&A firm to do other than to define those areas of the company that need fixed before they would allocate any resources towards selling the business.

Firms that provide Capital are likewise sought after to provide funding for equipment or working capital but unfortunately these potential customers often have the same sets of financial and operational woes as those described before. Just as with the M&A firms, the Capital lenders have few options other than to define the financial benchmarks the businesses must hit in order to qualify for new funding in the future.

Creating a Competitive Benefit

Given the similar situation that M&A and Capital firms find themselves in, I believe that rather than walking away from these clients that they instead help them facilitate the improvements they need. Rather than assume this role, which is typically outside their bandwidth, I would recommend that they partner with qualified consulting firms to help the client make the changes required to qualify for their services.

These types of changes require some time, but as we have consistently displayed in our own client projects there are significant improvements that can be implemented within just a few months. It is also typical in our experience to see the corresponding financial improvements begin manifesting themselves within the first several quarters thereafter and show significant progress towards meeting the new requirements. Given the quick financial return that can be delivered, these projects are often self-funding for the client within the first several months, making this an easier sell for all parties.

This proactive approach to the market will provide the following benefits to firms providing these services:

  1. Instead of losing this customer, given the customer can make the desired changes, it will create a future backlog for the firm for business in the coming quarters and years.
  2. The client company, having been helped by the firm through this process, will have a loyalty to that firm and seek their products and services without shopping for better deals.
  3. Finally, it will establish the firm as one of the few in the market that go the extra step to help their clients qualify for the services they are seeking and it will undoubtedly bring more business to their door.

In closing, I recommend that Merger & Acquisition and Capital firms consider these thoughts and take this broader approach to serving their markets. By partnering with competent consulting firms they can help facilitate needed client improvements, and through these value added relationships, fill an important market need plus grow their business at the same time.


Posted in Blog Post, Mergers and Acquisitions, Restructuring Businesses and Struggling Businesses


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