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.    

Succession
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
Succession
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
A Business Exists to Serve a Customer
Without satisfied and growing customers, nothing else a contractor does will matter. Few things are more profitable for contractors than recurring work negotiated with a select group of project owners.
Related Article
Leveraging Geographic Expansion for Leadership Development
Geographic expansion is impacting all contractors whether it is major customers pulling them into new markets, new competition coming into their “hometown” or as a proactive strategic growth move by the contractor.
Related Article
Coaching and "GPS Feedback"
Contracting is a business where operational excellence is a major factor in winning. Project success which we all know is very different than “winning” the project depends on thousands of details over many months executed well.
Related Article