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
End of Easy
Don’t give up just when the going gets tough, that should be your starting point. Know that most others have given up at this same point, so success and competitive advantage is probably just around the corner from when things begin to get tough.
Related Article
Lean Principle - People First (Then Process and Tools)
To optimize productivity, a contractor must focus on their people first, then processes and tools including technology as an integrated management system with a hierarchy. This is not a linear process: S.M.A.R.T. Experiments + Continuous Improvement.
Related Article
Customer Strategy Intersection
Having an effective market strategy is the #1 thing a contractor can do to ensure sustainable and profitable growth. For your strategy brainstorm the following and look for intersections:
Related Article