Shareholder Value Maximization is a process of optimization


The purpose of owning a privately held company is to maximize wealth in the form of current income and sale proceeds upon exit. But too many privately held business owners aren’t focused on maximizing shareholder value in a mergers and acquisitions transaction. Instead, they manage their company for current income, while being absorbed in the daily pressures of a tumultuous business environment.

Shareholder Value Maximization involves everything about the company. Its about the niche, the business model, Six Sigma, Key Performance Indicators, Lean Manufacturing, and exceeding cost-of-capital. It requires analyzing all aspects of your company to ensure that you are using the most cost effective technology, best practices, and that each aspect of the company is optimally designed, mapped, and integrated. Viewed another way, its about your Human Capital, Structural Capital and Rational Capital.

Most middle market companies are not built with the buyer’s needs in mind. Buyers want a diversified customer base, integration between company goals and individual incentives, cross-training, process mapping, a written strategic plan, real corporate governance, and vision. When you sell your company, private equity firms will be looking out 15 years. They will own a company about 7 years, and they will sell it to a party looking out another 7 or more years. Strategic buyers look out even longer.

Even with a company currently operating soundly, you face the risk that a disruptive technology can obsolete your business model. As quoted by Gary Hamel and Jeff Sampler in Fortune Magazine, December 7, 1998:

“Somewhere out there is a bullet with your company’s name on it. Somewhere out there is a competitor, unborn and unknown, that will render your business model obsolete. Bill Gates knows that. He knows that competition today is not between products. It’s between business models. He knows that irrelevancy is a bigger risk than inefficiency. And what’s true for Microsoft is true for just about every other company”

Being a privately held business owner with limited information resources is increasingly risky in the Information Age. Moore’s Law – which states that integrated circuit speeds double every 18 months – will hold true for another 20 years. The pace of change is accelerating towards a Technological Singularity where the speed of change starts to make the future become unpredictable.

The resources required to maximize the value of their companies in a mergers and acquisitions transaction are not available to most companies. We specialize in the methodology, skills, and data needed to create a shareholder value maximization strategy that will position the company for the next decade.

For more see:

BenchmarkingPrecursors to Value Creation
Cup of tea that looks like a pie chart

– Defining the correct metrics to monitor is essential for shareholder value maximization. It’s our cup of tea.

– Once identified, monitoring your mission-critical metrics ensures that your company is on the correct trajectory. Adverse developments and variance need to be identified as early as possible to ensure shareholder value maximization.