Contractor Exit Strategy 3 of 6: Strategic Sale to an Outside Buyer

Every contractor wants a strategic sale to an outside buyer.

D. Brown Management Profile Picture

Specifically, an outside buyer that sees such a strong strategic fit with their business that they are excited to pay a 6X earnings multiple of the best performing year the contractor has had during the last three years in cash. 

Succession: Exit Strategy 3 of 6 - Strategic Sale to Outside Buyer.

Fact: Most media coverage of deals is either a strategic sale or a catastrophic liquidation through bankruptcy. This can skew a contractor’s view of the market.  

Fact: Only a small percentage of ownership transitions could be considered strategic sales with high valuation multiples.

Fact: The only way a high valuation makes sense for the buyer is if the contractor has either a competitive position, technology, or process that can be scaled up significantly with access to more capital or other operational assets the buyer has. The ROI (Return-on-Investment) still must pencil out for the buyer.  

Fact: Few contractors have truly built highly scalable competitive advantages that make this type of exit an option.  

Fact: If you have truly built scalable competitive advantages that require more capital to execute then an outside strategic buyer is your only option.  

More from D. Brown Management
Aligning Your Team
Nothing will have a bigger impact on a contractor’s business than having the right people on the team and having that team all aligned around a common vision.
Leaders Make Things Fun
Leaders are always looking for ways to make really challenging things fun. This stretches teams and builds the relationships that hold teams together in good times and bad.
Ownership Transition - Key Seller Risks
Whether you are buying or selling a construction business, it is important to understand the perspectives of the other party. Each will tend to discount the risks of the other, impacting the ability to create the best deal.