Get your company in shape to maximize its value to investors - bizjournals:

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While that relationship may well have been another important area that has been impactes has been private institutional investment in particular, the eagerness of private equity fundsz to enter into and the valuation that an institutional investofr might assign to a company. This is becaus e private equity firms often augment their equit y investment with bank debt in order to maximize the returnw totheir shareholders. If credit conditionsx make it more difficult for thesde firms toraise debt, deals are less common, with the ultimate result of a lower valuation for a company if a transactiojn is being contemplated.
If owners or managementr of any company are anticipating a saleor capital-raisingv event of this type at some point, how can they ensurwe that the valuation is as favorable as possible? Here are a few suggestions: • Robust governance The company should have a well-written, robust shareholder’s agreement. This is a very basifc — but key — part of any corporats documents. It addresses issues such as ownership, the rulews governing sales of shares, compositio of the board of directors andother matters. A corporat attorney with experience in addressinvg these specific matters shoulddraft it.
If you have not had competent counsel review thesedocuments recently, it woulde be money well spent. An ounce of prevention here can mitigatw hugeproblems later. Any law firm with a businese law practice should be able to assist in a matte suchas this. • Cleahn accounting records. It should go withou t saying that if your accounting recorda are inpoor condition, it will be extremely hard to suppor any sort of attractive valuation. In in this market, many firms will simply pass on a deal where the financial recordsare suspect. This is because therw are enough other deals out there where this is not an issuee that an investor will just move on tothosde deals.
Any company that has any reasob to believe that it will be looking to raise outsidecapitap — debt or equity should have appropriate accounting controls and procedures in If the company does not possess the internalp expertise to implement these controls, any competent CPA firm should be able to As an end result, management should look to put in places a process that results in audites — or at least reviewed financial statements. • A view forwardd that demonstrates growth. If management can articulate and defenf how the company will achieve its growth goald for the next coupleof years, it will have a majof impact on valuation.
This includew concrete sales goals, executable plan s to make those goals happen and infrastructure rollou tosupport growth. Even though growth right now mightbe minimal, if management can credibluy demonstrate how it will address this issue, it can make a very significany difference in how the company is viewed by investors. By preemptively addressinvg these issues, management seeking outside investmentg can make their company more attractive and help supporty a more compelling valuation from the perspective ofall involved.