Strategic Alternatives Valuation Services
In addition to doing standard valuation work, our Valuation Team offers Strategic Alternatives Valuation Services. We do a lot of work with business owners helping them evaluate and understand their strategic options as well as to understand key value drivers.
The first step in Strategic Alternatives Valuation is to build a strong foundation:
- we do formal valuation work,
- we help understand the risk and opportunities with the business,
- we look at potential buyers and potential investors, and
- we look at what’s going on in the client’s sector to get a real-world read on what’s going in the market for them.
With that information, we work with the management team to understand the different options available and evaluate each option. Some scenarios include selling now, sell at some point in the future, raise capital, sell a division, or focus their strategy differently. Our valuation team can tailor the analysis to accommodate the critical decisions the business is facing.
Once the options are established, we model each option in further detail. We work with the management team to understand what assumptions must be true to determine the best possible option. We formally evaluate each option, discount the values of those backed present values so that we compare the options on an apples-to-apples basis.
Next, we work with the company to map the options against the share holders’ objectives so they are in the position to make the best possible decision. It’s important to understand the risks and opportunities to each of their strategic alternatives.
The Objective Team has done a number of strategic alternatives valuation projects over the years.
Case 1: A Company Didn’t have the Operating Capital to Remain an Independent Company
We helped the company evaluate whether they should sell the business today or whether they should take on the dilution from the capital raise and then grow and build the business. Is the risk of dilution worth it? How big does the business need to be built to make dilution a good option? These options were modeled out and presented to the board of directors. Strategic alternatives valuation allowed the company makes the best possible decision for its shareholder base.
Case 2: A Company with Multiple Divisions.
The company was deciding between 1) selling one of the divisions to raise capital to invest in another division, or 2) raise capital and keep growing and building both divisions. Our valuation team modeled the options and helped them understand the pros, cons, and risks of each scenario. Armed with this information, they were able to make the best possible decision.
Case 3: A Company Needs to Decide to Sell or Grow.
A common analysis we do involves helping a business owner or shareholder group decide whether they should l00k at a sale of a business today or whether they should keep growing the business and sell it at some point in the future. Sell or Grow seems like two definitive options; however, it is a very complex and tricky decision. It often depends on the shareholders’ objectives and their risk tolerance.
At Objective, our role is to ground business decisions in fact-based research so companies and shareholders can understand the risks and opportunities of each of the potential decisions.