Contractor Exit Strategy 4 of 6: Merger with a Similar Contractor

Merging with a contractor that has a complementary market position and management team can be both a great exit strategy as well as an effective growth strategy.

D. Brown Management Profile Picture
D. Brown Management
November 25, 2018 2 minute read
Share

The valuation of this type of deal is less than a strategic sale to an outside buyer, where the buyer is looking for rapid scalability to get their return on a high valuation.  

Succession: Exit Strategy 4 of 6 - Merger With Similar Contractor.

In this type of a merger, there might be some modest operating synergies and growth opportunities, but for the most part, the business is expected to continue to perform as it has been.

Achieving these synergies requires complementary management teams and aligned cultures. Preferably, this has been tested before the deal through working together on a few projects.  

The most important financial dynamics to analyze in this type of deal are:

  • What will be the combined financial strength of the two contractors? Stretching too far will endanger the owners of both.  
  • Don’t overestimate the operating synergies or growth that will be achieved in the deal.  

The major upside for the owner(s) that are exiting is the security and the stability of the combined operations as they will most likely be getting their capital out over time depending on the structure of the deal.    

Contractor Exit Strategy 4 of 6: Merger with a Similar Contractor
Continue building value in your business, yourself and your key team members with a good succession strategy....
Previous Next Go To Series
Related Insights Series
Contractor Exit Strategy 4 of 6: Merger with a Similar Contractor
Continue building value in your business, yourself and your key team members with a good succession strategy....
Previous Next Go To Series
Related Insights Series
Organizational Change and Sustainable Growth
Improving the rate that change is adopted across the whole company becomes increasingly more important and more challenging as a contractor grows. We will cover the basics of change, including how it is linked to strategic choices and management.
Related Article
Work Observations and Time Studies (Basic Overview)
Work observations and time studies are related but distinctly different. Both are incredibly powerful tools for management, process improvement, and talent development. Starter resources and use cases below.
Related Article
Organizational Structures and Leadership Development
As contractors look at their organizational structures with an eye toward both sustainable growth and succession, they must balance the efficiency a functional area structure provides with the leadership development of a business unit structure.
Related Article