Over the past 23 years, we have seen a common theme amongst sellers: the desire to showcase a highly favorable future (‘the upside’), in which they are going to achieve significant growth, whether it be capturing market share, winning new contracts, or breaking through with a large new customer. As we mentioned in Deal Note® 100, while it’s important to highlight growth opportunities, they must be backed by realistic, bullet-proof evidence.
It’s expected that sellers will envision a bright future for their company filled with growth and prosperity. This optimism often translates into a desire to showcase significant upside potential in the Confidential Information Memorandum (CIM). While highlighting growth opportunities is an integral part of presenting a business, it’s crucial to understand that without realistic and well-supported projections, showcasing an unrealistic future will usually result in a lower price for your business in the end. Almost all buyers in the middle market of the aerospace and defense industry conduct exhaustive due diligence before buying a business. And more than 75% of their efforts will be focused on the prospects for the business. Without strong supporting evidence, forecasts of massive significant growth will be highly discounted and will result in buyers losing confidence not just in your projections but also in all aspects of your business. We have learned over the past 23 years that the best way to receive the highest possible price for your business is by presenting projections built on strong evidence. This is why we work so hard with our clients in the early stages of each engagement, to help them build great projections with strong supporting evidence that can withstand exhaustive buyer due diligence
Have a great day everyone,
Max McFarland
Associate
