Business Turnaround and Exit Strategies Workshop
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- The document provides an agenda for two workshops on business turnarounds and investment deal breakers. - It introduces Incubate Advisory, a firm that provides services including acquisitions, due diligence, growth strategies, and exits. - The workshops will cover topics like understanding market dynamics for turnarounds, and common deal breakers like unrealistic valuations, weak finance functions, and lack of management succession for deals.
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Business Turnaround and Exit Strategies Workshop
- 2. Welcome Introduction Incubate Advisory Team Workshop Part 1: Business Turnarounds Workshop Part 2: Investment Deal Breakers Agenda
- 4. Acquisitions Due Diligence Investment Opportunities Growth Management Services Strategy Board Services Exits Sales Mandate Exit Preparation
- 5. Our Team SHAHID A. BALOCH DEBT STRUCTURING ADVISORY SPECIALIST BRAD MCMECHAN, CPA, CA PARTNER HEAD OF ACQUISITIONS ARA SAHAKIAN CPA, CA MANAGING PARTNER HEAD OF EXITS KHALED MERSI PARTNER HEAD OF GROWTH
- 7. • Understanding the external environment/market dynamics (Customer Survey, SWOT, Market Research, etc.) • Vision, mission, and values • Focused growth strategy • Office of Strategy Management • Implemented Strategy maps and Balanced Scorecards • Culture of focusing on strategic priorities, performance-based, team “Alignment means creating consistency between all activities of an organization and its strategy.” Michael Porter The Key To Get There (The Process)
- 9. Develop the Strategy Translate the Strategy Align the Organization Plan and Fund the Initiatives Review the Strategy Evaluate & Adapt the StrategyStrategy Management Cycle • Strategy Maps • Balanced Scorecards • Communicate Strategy • Cascading • Align People • Align Incentives • Align structure • Align Culture • Build key initiatives • Prioritize portfolios • Fund initiatives (Stratex) • Strategy Review Meetings • Performance Analysis • Mission, Vision • SWOT Analysis • Financial Forecasts • Update strategy • Strategy Analysis A Focused Approach on Strategy Management Cycle
- 10. Introduction to Strategy Execution Business Results = Strategy + Execution Mission / Vision Strategy Maps Strategic Communication & Strategic Alignment Balanced Scorecards Performance Monitoring Monthly / Quarterly Strategy Reviews
- 11. Strategy Execution & The Strategy Maps BALANCED SCORECARD Measures, Focus and Align TARGETS & STRATEGIC INITIATIVES What are the priorities MISSION Why we exist VALUES What’s important to us VISION What we want to be STRATEGY Our game plan PERSONAL OBJECTIVES What I need to do STRATEGIC OUTCOMES Satisfied SHAREHOLDERS Delighted CUSTOMERS Efficient and Effective PROCESSES Motivated & Prepared WORKFORCE STRATEGY MAPS Translate the strategy (into operational terms) Strategy Execution Business Results
- 12. • To set direction and priorities • To get everyone on the same page • To simplify decision making • To drive alignment • To communicate the message Why Do You Need a Strategy in Place?
- 13. • Writing the plan and putting it on the shelf • Lack of understanding the environment • No full commitment • Not having the right people involved • Unwillingness or inability to change • Having the wrong people in leadership positions • Lack of focus and resources • Focusing on results not the process! Why Strategies Fail?
- 14. Execution is The Hard Part of Strategy “Only 10% of well-formulated strategies are actually carried out well.” According to a study cited by Kaplan & Norton “82% of Fortune 500 CEO’s feel their organization is effective at strategic planning. Only 14% indicated to be effective at implementing the strategy.” Forbes Magazine
- 15. GROWTH AND EXIT When a company witnesses such a growth, one option will be to EXIT
- 16. DEAL BREAKERS
- 17. Deal Breakers • Unrealistic Expectations of Valuation • Non-Disclosure / Misrepresentation of Material Items • Weak Finance Function • Lack of Management Team / Succession • Other Common Issues
- 18. 1 8 • Number in Mind • 'Hockey Stick‘ Forecasts • Accounts audited by a third tier auditor • Talking to wrong buyers, or only a single buyer Solutions ✓Get a valuation ✓Understand multiples – X times EBITDA ✓Achievable and supportable projections (“under promise and over deliver") ✓Have accounts audited ✓Create competitive tension Unrealistic Expectations of Valuation
- 19. 1 9 • Issues WILL come out • Hiding issues (even small things or historic events) • Misrepresentations of material facts • Destroys confidence and trust Solutions ✓Open, consistent and predictable – creates trust ✓Over-disclose rather than under-disclose ✓Get data room organized ✓Confront a strategic weakness head on, discuss with advisor Non-Disclosure / Misrepresentation of Material Items
- 20. 2 0 • Accounting policies not being followed – Revenue Recognition • Untimely reporting • Poor controls - fraud • Unreliable financial information • No push back, Yes sir Solutions ✓Hire qualified accounting staff – CA, CPA, ACCA ✓Hire approporaite level of staff, not just a bookkeeper ✓Engage a reputable auditor, they are NOT all the same ✓Outsourced CFO Weak Finance Function
- 21. 2 1 • Owner essential to business • No management team or succession in place • Customer relationships depend on owner / not contracted • Owner focusing 9-12 months on sale process Solutions ✓Make yourself redundant, move to Board ✓Hire independent manager, have succession plan ✓Systems & processes, document key aspects ✓Get contracts signed ✓Free up resources ✓Agree to transition period post sale Lack of Management Team / Succession
- 22. 2 2 • Customer concentration • Related party transactions • Personal expenses, employing family • Large amount of cash transactions • Ongoing litigation • Large accounts receivable or inventory balances • General lack of housekeeping, poor or inaccurate records • Minority shareholders Solutions ✓Diversify revenue actively ✓Remove non-business assets & expenses ✓Collect overdue debts ✓Clean up ahead of time ✓Purchase minority shareholders’ interest Other Common Issues
- 23. 2 3 • Different type of investors • Angel / Venture Capital • Private equity - MBO • Strategic • Individual / Peer to Peer • Investor motives • Deployment of funds • Strategic - expansion /competition • Other • What investors look for when acquiring a business • Returns • Industry/sector focus • Strong management - succession • Ability to grow – scale up • Mitigation of risks • What can you do to mitigate the risks? Understanding the Investor Mindset
- 24. 2 4 • Ideal when preparing a business for sale ✓Proactive • Augments internal resources ✓Expertise & experience needed to complete the transaction • Highlights deal issues before they become deal breakers ✓Identifies & addresses risks early in the process ✓Skeletons in the closet, no surprises ✓Provides time to mitigate risks • Maximizes value by providing a transparent, objective & credible view of the business ✓Improves accuracy of the historical and projected financial information ✓Gives potential buyers comfort and transparency before investing Sell-side Due Diligence
- 25. 2 5 • Maximizes value by identifying adjustments that positively impact EBITDA ✓Potential acquirers only negotiate negative adjustments • Gives opportunity to be in control of the process ✓Minimizes negotiations ✓Accelerates time to close Sell-side Due Diligence
- 26. 26 ✓Formulate a Strategy and Execute it ✓Strategy is a Continual Process Strategy ✓Can‘t turn your business around without a Strategy ✓Time is never on the seller’s side, preparation is key ✓Realistic valuation ✓Due diligence is crucial, buy side & sell side Summary
- 27. 27 QUESTIONS ? Khaled Mersi Partner M +971 55 104 4340 E khaled.m@incubateadvsory.com T +971 4 392 9535 Brad McMechan Partner M +971 50 551 6241 E brad.m@incubateadvsory.com T +971 4 392 9535
- 28. THANK YOU