Mergers and Acquisitions: Using Your Data to Help Secure a Sale

Mergers and acquisitions (M&A) activity slowed down considerably in 2023 due to investor concerns over a possible recession and rising interest rates. For the first time in 10 years, global mergers and acquisitions deal volumes were below $3 trillion.

Despite these statistics, investors entered 2024 with optimism because a reactivation of mergers and acquisitions activity is expected due to improvements in financial markets, pent-up supply and demand pertaining to deals, and the expectation for many companies to adapt and transform their business models, according to S&P Global Market Intelligence

Another reason that market researchers are optimistic is due to the amount of cash reserves or liquid assets available for use in the private equity sector, which rose 8% to $2.59 trillion globally at the end of last year. This means a record amount of idle cash that private equity firms have raised from investors, but have not yet deployed in deals, is ready and available to be allocated towards buying companies and then managing them for a profit. 

Once the market rebounds, smaller to mid-sized business owners can expect to see this idle cash being put to work. To stay ahead of the curve and in the know, continue reading this short article on using data to help secure a sale. This article is for companies that are considering selling and is the second part of a two-part series. In part one, we covered what you need to know about private equity.

Different types of sales 

In Part I of this series, we talked quite a bit about private equity, but there are several different types of sales to consider. 

Mergers: A merger is where two separate companies combine forces to create a new, joint organization. 

Acquisitions: An acquisition is where one company purchases most or all of another company. The benefit to the buyer is that they are increasing market share by buying other organizations within the industry, thus ensuring a greater percentage of the market. Additionally, businesses use acquisitions to diversify their customer base by either entering new geographies or adjacent markets.

Private Equity: Private equity groups (PEGs) have a pool of capital from investors, and are looking to purchase a business – either in its entirety or a majority stake – with the intent of turning a profit for their investors. 

Getting started

If you’re approached by a potential buyer, typically your first question should be: “What is the value of my business to you?” In this case, after signing a non-disclosure agreement (NDA) to protect your confidential company information, the potential buyer should be able to provide a ballpark estimate after reviewing a number of standard financial documents. If you’re intrigued, you’ll want to go a little further.

Data potential investors want to see

In addition to top-line financials, investors will want to drill down and see profitability at different levels, such as by vertical market, individual contracts and others. Each step of the way, they will want to examine revenues and expenses for every level to gain a better understanding of the financial health of your company. The data you provide should cover your financial history so potential investors can gain an understanding of your profitability over time.

Company assets 

For potential investors to gain a clear idea of the company they may buy, they will want information on all company assets. Examples include real estate, inventory, vehicles and equipment. At some point, they may also ask to see titles for all vehicles and equipment. Start organizing and collecting these legal documents now to make the process run smoothly and to eliminate a potentially time-consuming process that could deter the sale. 

Business challenges 

Potential investors will want an open and honest discussion with the current business owner about any challenges that could potentially have a financial impact on the company. Common security and cleaning industry examples include compliance, insurance and legal issues. 

Future growth 

In addition to where your business currently stands, potential investors will want to know where it’s headed. To showcase this, you will need to provide a budget and sales forecast. Investors will also be interested in customer-related data, which will help them better understand the overall health of your business. Offer them data that pertains to customers, revenue and employee retention.

How technology aids in an acquisition

While the thought of pulling together all of this information may be overwhelming, having the right technology in place – with reporting capabilities – is a huge time-saver that can minimize the number of manual tasks you perform. 

Modern tech can also provide better data integrity since it is designed to eliminate missing or incomplete data while making other reports available. Software tools can also help you avoid pulling data from a number of different sources, as the alternative can be a time consuming challenge.

Cleaning and security companies, in particular those who use integrated, end-to-end ERP and workforce management solutions, can gain an advantage with solutions that provide a single source of truth when it comes to data. Data that is streamlined can be used to create automatic and on-demand reports, as needed. 

Using these software tools lets businesses select specific timeframes or verticals down to the individual job or contract for investors requesting reports. Since potential investors are generally looking to partner with more forward-thinking, modern businesses, those with the technology and streamlined processes already in place show acclimation towards accelerated growth.

ERP and workforce management solutions

Industry experts are expecting more mergers and acquisitions due to the record-breaking accumulation of investment capital. Private equity firms have also been showing increased interest in the security and cleaning industries, due to their resilience during the recent economic downturn. 

Security and cleaning professionals, who may be approached by a potential buyer and want to stay one step ahead of the competition, can take advantage of data tools made accessible by ERP solutions and integrated workforce management software. Speak with one of our specialists for more information on the solutions that TEAM Software offers. For answers to questions about mergers and acquisitions, message us to speak with our in-house expert.