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
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.    


Succession
Continue building value in your business, yourself and your key team members with a good succession strategy....

Succession
Continue building value in your business, yourself and your key team members with a good succession strategy....

Early Identification as a Trainable Skill
The ability to identify potential changes early is a skill that can be tested, trained, and managed just like a craft skill.
Four Stages of Learning a New Skill
It is impossible for any of us to know what we don’t know. And this is the stage where we all must start at when learning a new skill.
Competencies vs. Confidence vs. Success
Sustainable growth comes when confidence is kept in alignment with the competencies required to effectively serve the customer.