As construction company owners get closer to retirement and are considering selling their companies, private equity firms have become a more popular option. However, it is important company owners understand what these firms are seeking when looking to acquire a company.
A company’s financial standing often is crucial to a sale. For Construction Pros shares the following principles to help a construction company gain attention for strong financial performance.
- Anticipate and answer scrutiny. Private equity firms know how to identify red flags. It is vital to have strong financial processes established so you are not rushing to organize financial details or finalize contracts when a private equity firm is showing interest. Scrambling to fix unaddressed issues can lead to the risk of missing major details. Have sophisticated financial practices in place as early as possible.
- Ease integration fears. A firm will feel better about integration if your company has up-to-date technology and well-trained internal teams and demonstrates commitment to best practices. Professionalism is key during the dealmaking process, so be sure you provide information in a timely manner; answer questions honestly and openly; and share details about your capabilities.
- Enhance the quality of your Quality of Earnings Report. Prioritize getting a robust, reliable monthly view of your company’s financials. Misclassified or misallocated costs can compromise valuations. Work on reconstructing monthly financials and work-in-progress reports; optimizing fixed asset and equipment policies; cleaning up expenses; and generating disciplined forecasts.
