Brad (Partner) & Hal (Senior Advisor) spoke to a crowd of mainly healthcare business owners divulging current corporate finance observations and figures, mergers and acquisition strategies, critical business valuation factors and how to increase shareholder value for any business on 1st December 2020.
Watch the full webinar here (40 min).
After better than expected year of transactions (despite COVID-19), Titan Partners have the following practical and useful insights to share with the broader Australian business owners contemplating future directions and how to grow or maximise the value on sale of their business.
M&A Activity Comparison (Pre VS During COVID-19)
Not surprisingly, M&A transactions have decreased across most industries with the impact of COVID-19, apart from Resource & Mining, Real Estate and Healthcare. The Titan Partners Corporate Finance team expects healthcare is poised to bounce back quicker than many other industries as it is one of the few industries to have a ‘structural tailwind’ i.e. an ageing Australian population and a backlog of elective health services postponed by COVID.
Factors Driving A Higher Sales Price Multiples
- Consistent industry growth
- High margins
- Long-term customer contracts, and Diversity of the customer base
- Professionally managed operations (not founder dependant)
- Strong track record of performance
- Will ‘buyer synergy’ be created/reaped? This usually means expanded revenue or cost savings after 2 businesses merge or acquire.
- Are there multiple buyers bidding for your business? Is the timing right in selling or buying?
Other factors including the size of the Business, diversity of business divisions and number of bidders in a competitively run sale process will impact the ultimate sale price of a company.
Growth Strategy
For Companies in the pursuit of growth there are typically three options available to them, and the determination of which to choose is often dependent on the availability of resourcing.
You can typically grow your business in a few ways:
- Build – Internal development (with your own capital/resources)
- Borrow – Contractor/Alliance/Joint Ventures
- Buy – Mergers & Acquisition
Drivers of M&A Growth Strategy
In the pursuit of an M&A strategy, the goal is to acquire the resources of another entity in entirety. And in doing so, executives and company owners in the current market are often motivated by some combination of the following key factors:
- Diversification – The classic ‘don’t put your eggs all in one basket’ diversification approach to hedge against market downturns and build additional revenue stream. M&A can be used to acquire businesses in adjacent markets to diversify risk.
- Lower Cost of Debt – Interest rates have never been this consistently low, whilst they may fluctuate, the low cost of debt fuels demand for M&A activities.
- Fragmented Market – Look for opportunities to acquire smaller operators in its same industry to achieve economies of scale.
- Buyer Synergy – by combining the resources of an acquisition target with that of the acquirer, a buyer can often generate a higher level of earnings and/or reduce the operating cost base of the combined entity.
Shareholder Value
For shareholder value strategies, please click here for a dedicated article.
Part of our engagement when working on sell-side mandates, our analysts focus their buyer research on finding acquirers that have the most to gain. In doing so, we connect clients with buyers that will likely pay more for the acquisition.
M&A often fast tracks growth through access to new markets, sales and distribution channels, Patents/IP or by simplifying and optimising infrastructure, operations and costs.
Please contact us for an obligation-free discussion on how Titan Partners may be able to help you achieve your business and financial goals for 2021.
