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Vol. 7, No. 6, June 2009
HOW MIDDLE-MARKET FIRMS CAN PROFIT BY APPLYING BIG BUSINESS STRATEGIES: In the article below, George M. Norton III, a Senior Advisor at FOCUS, draws upon the content of his book, “Valuation: Maximizing Corporate Value,” to supply a brief overview and practical guide to seven steps for incorporating sound strategic and valuation principles into organizational decision-making.
When the book was published in 2003, the President and CEO of Greyhound Lines, Inc., said: “George Norton has made the complex subject of business valuation and value creation understandable. The book is a straightforward, how-to guide…it is not only a good read, it is a must read.”
George Norton has decades of experience in all phases of business and has held senior positions at Booz & Company, Northwest Industries, Duff & Phelps and Ernst & Young. He began his career designing business analysis models for IBM and then earned an MBA in International Finance from The Wharton School.
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Operating nationally and internationally, FOCUS is currently working with buy- and sell-side corporate clients, private equity groups, holding companies and late stage venture capital firms in the following areas:
- Advertising & Marketing
- Building Materials
- Business Consulting Services
- Business Process Outsourcing
- Call Center Services
- Distribution
- Education and Human Capital
- Electronics
- Energy
- Engineering
- Financial Services
- Food, Beverage and Restaurant
- Government, Aerospace & Defense
- Healthcare & Life Sciences
- Information Technology
- Manufacturing
- Media
- Parking Operations
- Retail Franchising
- Semiconductor Equipment
- Telemarketing
- Warehouse Distribution
We have executed dozens of transactions in a range of market segments, but the same fundamentals apply across all of them. Our on-going transaction process provides us with up-to-the-minute market knowledge in these sectors that may be of corporate development interest to you.
Inquiries should be addressed via e-mail to info@focusbankers.com, by telephone to 202-470-1973 or by fax to 202-785-9413.
How Middle-Market Companies Can Profitably Apply Big Business Strategies
By George M. Norton III, Senior Advisor, FOCUS
By applying a few proven concepts, business owners, CEO’s and other senior executives in middle-market firms can link tactics and strategy to develop a practical framework for decision-making that can, if followed, help increase company value. Working through the process requires discipline, attention to detail and considerable commitment from everyone involved, but the results can be enormously rewarding.
Seven Steps Supply a Foundation for Effective Action
The process begins by assembling a management team that will work together through seven specific steps, building consensus and common values for the firm. Once the seven steps are defined and complete, the company will be ready for action with a blueprint for achieving key objectives, raising operational efficiency and, ultimately, building company value.
The first three steps focus on the history, value and environment of the company with the management team achieving consensus on the firm’s present condition as well as its prospects for growth and profit. The second three steps (steps four through six) involve development of a strategic framework which supplies a solid foundation for appropriate action in the future. The final, seventh step, focuses on successful execution.
Of course, each step requires a number of sub-steps, application of many specific strategies and formulas, and so the brief description below supplies only an introduction to what can be achieved:
STEP 1: Where has the company been?
The first step includes both a qualitative and quantitative historic assessment of the company—in detail. You will be conducting a strategic audit. Existing strengths and implicit strategies will be identified, performance and profitability ratios will be determined and the relative value of the firm established.
STEP 2: What is the company worth now?
In this second step, the management team will calculate the present values of the company’s cash flows. In attaining an accurate estimate of the current worth of the firm, the team will gain new knowledge of not only the cash-generating capabilities of the business, but also of its value on the open market.
STEP 3: Where does the company operate?
Step three is all about planning. The management team will gain a new understanding of the firm’s strategic landscape, discovering in the process how other organizations and various special interest groups—due to their relationship with the firm—may become important factors in the company’s decision-making and its general success or failure.
STEP 4: Define the company mission.
In developing a framework that is both logical and interactive, management also learns to act strategically. This step requires working through a rigorous six-level process that includes creating a mission statement, determining niche positions and goals, setting objectives, defining strategies and, finally, determining relevant actions.
Along the way, a shared vision will be created along with a commitment to common values and purposes. At this point, a solid strategic foundation emerges for dealing with many of the issues facing the organization.
STEP 5: What do we want to accomplish?
Running a company requires both management of day-to-day operations and allocation of the firm’s resources. In this crucial step, a strategic framework is built that will support the long-term success (even survival) of the company. Once a solid Strategic Framework is developed, the management team can generate—and execute—proven strategies that can maximize the value of the now and in the future.
STEP 6: Which strategies supply the highest value?
In this step, the management team undertakes a candid evaluation of the values identified in the Strategic Framework (Step 5). Until now, the process has been mostly theoretical.
Now, because execution of the selected strategies involves all aspects of the business, it also is time to quantify the impact of the strategies selected for action on the value of the organization. At the same time, it is useful to assess what will happen to the firm’s value if selected strategies are not acted upon. This is a necessary step where the management team carefully evaluates alternative approaches before taking action.
STEP 7: Acting to achieve objectives.
At this point, your company is ready for action. It is time to get specific about how the firm will successfully execute the selected strategies (from Step 6). In completing the previous steps, the management team engaged—and the whole company—will have developed a shared set of values and purposes and a common language to use in discussing future plans.
With care in execution of the Strategic Framework developed, a company should be able to enhance its value, both near- and long-term. The investment in working through the steps should be more than compensated by the resulting bottom-line success.
Craig Custer Joins FOCUS’ Washington Office as a Managing Director
Craig C. Custer has joined the Washington, DC office as a Managing Director. “Craig has more than 20 years of investment banking experience, where he advised management teams on transactions involving mergers and acquisitions, issuance of public and private equity, and both high grade and high yield debt financing. He will be a tremendous asset to our team,” said Doug Rodgers, CEO and Managing Partner of FOCUS.
About Craig Custer
Prior to joining FOCUS, Mr. Custer served as Managing Director at Harris Williams & Co. where he helped manage Cobblestone Advisors, a sixteen person specialty group focusing on M&A transactions valued in the $10-75 million range. Previously, he co-founded Custer Williams & Co., a private investment bank specializing in lower middle market transactions. He spent ten years at NationsBanc Capital Markets (now Banc of America Securities), and began his career at Blyth Eastman Paine Webber (now UBS Securities) in New York. Read more...
Kevin B. Hogan Joins FOCUS’ Chicago Office as a Senior Advisor
Kevin B. Hogan has joined FOCUS as a Senior Advisor in the Chicago office. “We are very fortunate that Kevin has agreed to join FOCUS as a Senior Advisor. His experience in the IT industry and his many years working with C level executives adds a great deal to what we can offer our clients,” said Fred Floberg, Regional Managing Director of FOCUS.
About Kevin Hogan
At the start of his career, Hogan spent 15 years selling main-frame computers with NCR, Honeywell Information Systems and Raytheon Data Systems, later becoming Vice President of Sales for a startup company which provided computer services. In 1978, Hogan orchestrated a significant career transition and established Computer Professionals Executive Services LLC, a retained executive recruiting and transition coaching firm. Read more...
RECOMMENDED READING:
Obama Erects New Hurdles for M&A
In the May 29, 2009 issue of The Wall Street Journal, John Jannarone writes that, “Acquisitive companies often tout consumer benefits to win antitrust approval for mergers. Will the Obama administration keep buying it?” According to Mr. Jannarone:
“…the “Federal Trade Commission dinged a merger for the first time since President Obama tapped a new chairman… During the Bush administration, the FTC cited ‘efficiencies’ to OK the merger of drug distributors… Previous rulings by the Justice Department, which shares authority over mergers with the FTC, also took account of such ‘efficiencies.’ It approved Sirius Satellite Radio's acquisition of XM Satellite Radio last year. Justice said consumer-friendly efficiencies helped offset the competitive harm of combining the only two firms in the industry.
The department's new antitrust chief, Christine Varney, is now questioning such efficiencies… Companies pursue mergers for the benefit of shareholders. As merger scrutiny gets tougher, it is becoming less worthwhile to argue otherwise.”
To read the full article, go to http://online.wsj.com/article/SB124356424788265247.html
