Evaluating strategic alternatives to boost shareholder value

Client name confidential

Objective

Compare the costs and benefits of two diverse strategies for positioning the company for acquisition.

Background

The board of a leading data storage and semiconductor equipment business was considering selling the firm, but had little insight into the company’s current value.

As the board reviewed their options, some key questions arose. Who might buy the company – and at what price? Should the board approve an immediate sale – or would it be more profitable to delay the sale in order to improve the company’s valuation?

Maher Marketing was asked to provide an independent evaluation of the company and to present an analysis of how various alternative strategies – based on timing and positioning – could create maximum value for shareholders.

Assignment Overview

In many cases, the strategic decision to sell a company generates significant concerns. Improving a company’s positioning can improve valuations, but would the extra expense be worth taking on this initiative?

To help the board evaluate various alternatives, the assignment was segmented into three phases:

1. Provide my opinion on the prospects for selling the company in three to six months. This phase included reviewing valuation ranges, identifying potential buyers, and creating a short list of buyers best suited to acquire the company.
2. Present a detailed comparison of the costs and benefits of selling the company in the short term versus implementing a strategy to grow the business over a three year time frame to improve its potential valuation.
3. Create a business strategy to leverage the company’s intellectual and business assets for substantial short-term growth. During this phase, I consulted with industry executives and interviewed customers to:
   • Refine the core value proposition of the company in view of its market and customers – and recommend potential improvements.
   • Estimate resource requirements (management, financial, and operational) for achieving key business goals.
   • Compare the execution risks against the benefits of improving the business over three years.

Lessons Learned

As with most complex businesses decisions, strategic analysis is both an art and science. One must delve beyond the numbers to get the full story – essential to advising clients on critical issues such as selling a company.

For this assignment, I conducted extensive interviews with a wide range of stakeholders to get the full story.

Interviews of board members and key executives provided revealing insights into strategic business issues. Speaking with customers helped me get a candid assessment of the company’s products, services, and positioning. And I talked at length with six potential acquirers, many of whom I knew personally, to get a realistic estimate of what they might pay for the company.

By going beyond the numbers, I was able to get a far more comprehensive view of the strategic issues involved in such a complex decision so I could present a frank and straightforward recommendation on selling the company under two very different scenarios.