Even if you’re years from pursuing one
Speed Up The Process By Getting Financially Organized
Taking stock of your financials ahead of time could save you months and a lot of headaches throughout the deal process. “Financial organization is notoriously under-invested in,” says Intrepid Beauty and Personal Care Managing Director Mike Garcia. “Spending time and adding resources there ahead of a process is a smart move,” he says. “Hiring a strong Chief Financial Officer or financial controller, tapping an outsourced financial resource who specializes in preparing businesses for an M&A transaction, or performing a sell-side quality of earnings prior to a transaction process are all good options,” says Lauren Antion, Vice President of Intrepid’s Beauty and Personal Care practice.
Reduce Stress (and Sustain Success) By Involving The Right People
We’re just going to give it to you straight—it’s very tough to go through an M&A process without a trusted team in the loop. “We try to take as much work as possible off the plate of our clients, but a transaction process will require a substantial amount of company data, files, and details that will ultimately be requested by the buyer or investor,” Antion says. “Strategically involving key members of the organization at the start of the process can allow founders to move through diligence more efficiently and provide more accurate information along the way. Involving these key employees will also allow the entrepreneur to keep their eyes on the KPIs, so the brand can continue to grow during this critical time,” says Steve Davis, Managing Director and the Head of Intrepid’s Beauty and Personal Care Practice.
Avoid Disasters By Buttoning Up Your IP
Think of everything that makes your beauty brand special: the name, the logo, the formulas, and take any steps you can to cement your ownership of those assets, Davis and Garcia emphasize. Is your trademark registered? Do you own your own formulas? Do you have supply chain redundancies? Are you highly dependent on a particular supplier or retailer? Any chinks in the armor of your organization can become speed bumps when you’re seeking investment.
Maximize Value By Connecting With An M&A Advisor Early On
“A lot of companies don’t think about an investment bank until they’re fully committed to doing a deal,” Garcia says. “But there is real value in utilizing an investment banker as a friend, a resource, and a sounding board along that journey – months, and in some cases years, before a transaction.” This can translate to real value when it’s time to go to market. “There are a lot of tactics, like the ones we’re sharing here, that you can use to maximize value, and getting the right banker involved early helps with that.”
When it comes to choosing the right banker, Davis advises selecting an advisor with deep expertise in your sector. Asking about past deals they’ve done within the sector, the types of buyers they’ve done transactions with, and more can give you an idea of their experience level. “The world of generalist M&A advisors has gone away—you need someone who knows your brand, the value-drivers of the sector, and the right buyers or investors for your business,” Davis says. Finally, choose someone you actually enjoy spending time with and that you trust. “Once you get past the basics, ask yourself if you feel like you’re going to get along with them over the course what can be a pretty intense process and whether you can entrust them with the company and brand that you have built,” Davis says.
Fuel Growth By Leveraging Private Equity Relationships Smartly
Ever wonder what to do with inbound emails from a private equity firm before you’re ready to take on a significant investment? Antion says building relationships with investors in advance of a process can be both helpful and strategic given that these buy-side professionals may be able to share valuable insights from their experience working with relevant portfolio companies. “Many of the consumer-focused funds reaching out to entrepreneurs have highly relevant experience working with beauty and personal care brands and can offer valuable insights and helpful introductions related to product development, supply chain and manufacturing, digital marketing, and brick-and-mortar retail launches,” Antion says. “These private equity relationships can also help you understand how buyers and investors will think about your business and the value of your company.”
However, it’s best to hire a banker before you start to seriously talk about what an investment would look like. “If the conversation goes too far, all of a sudden you may be in a position where you have to make decisions without any relative data points. It might be a phenomenal offer, it might be a horrible offer, they may be a terrific fit, they may pale in comparison to other groups – but you don’t know because you’re making this critical decision in a vacuum without the perspective of a process,” Davis says.
Get Ready to Bring On A Partner By Identifying Areas You Could Use Help
At the end of the day, no business owner is going to have it all figured out when they go to market. And that’s a good thing. Untapped channels, product categories, and markets are opportunities for the right buyer to add value, Antion says. You might think, ‘I have deep expertise with digital marketing and growing direct-to-consumer sales, but I don’t have experience with brick-and-mortar retail or international distribution, so I am looking for a partner that understands how to best expand to those untapped channels.’ On the flip side, you can have a brand that has successfully partnered with key retailers to drive sales, but has not found a way to effectively drive traffic to its own website and build its direct-to-consumer presence. “Particularly with private equity firms, they are looking for places to add value. It’s okay not to be the expert at everything,” Antion says.