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IN TODAY’S ENVIRONMENT, WHAT KEY CHARACTERISTICS MUST BE PRESENT (RELATIVE TO THE COMPANY) TO ACHIEVE A GOOD VALUATION?

IN TODAY’S ENVIRONMENT, WHAT KEY CHARACTERISTICS MUST BE PRESENT (RELATIVE TO THE COMPANY) TO ACHIEVE A GOOD VALUATION?

Today’s complex M&A environment presents many opportunities to achieve a high valuation, assuming certain characteristics are met.

A company looking to obtain a high valuation must demonstrate a track-record of growth and profitability. Historical success is often an indicator of future performance and investors are looking for businesses that have established revenue growth along with high levels of profitability.

Another characteristic that investors will pay a premium for is a differentiated value proposition relative to competitors.  A competitive advantage that is sustainable will positively impact valuation.

If the market or industry is expected to grow and there is an opportunity to expand the business' product / service line, then valuation can also be higher.  Investors are ultimately looking for long-term sustained growth, which can be achieved by offering additional products / services with a developed go-to-market strategy.

Finally, a business with a great reputation in the marketplace and a management team that has a strong vision for the future will command a higher valuation.  Reference checks and customer calls often provide investors with a high level of comfort in their evaluation of a business.

 

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