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Selling any company is complex and involves a myriad of issues. Consumer products businesses are no exception, and offer a unique set of challenges for their owners. In addition to the normal issues of presenting an attractive growth story, a solid management team, and clean financials, consumer product companies need to be prepared to convince buyers that their brand is valuable, their sales channels are transferable, their product pipeline is full, and that their logistic systems can transition smoothly to a new owner.

Showing Value In Your Brand

In the consumer products arena, branding is critical. The more unique and defensible your brand is, the higher the multiple you will receive for your business. Consumer brands are worth the most, but private label brands are also valuable if the retailer appreciates the uniqueness of the product offering. In either case, defining and substantiating the true value of the brand is a key pillar to building the sale story. This also includes the product road map and pipeline because these allow the buyer to sustain the brand value, including sales and profits, until they can do so themselves. Finally, marketing and promotion also feed into the brand value, so creating an easy path for a buyer to sustain these efforts without discontinuity will help you realize the brand’s full potential.

Demonstrating Healthy Retail Channel Relationships

Retail channels are a key value driver for a consumer products business. For smaller companies, getting access is a big challenge, so they need to be able to convince a buyer that they are solidly entrenched where they are, and have significant untapped potential in places where they aren’t. Medium-sized companies almost always have sales through some of the big boxes or clubs, and this often results in some customer concentration. For them, the story needs to strike the right balance of being able to play with the big boys but not being susceptible to major business risk should they lose one of them. Relationship history and tenure, along with product, department, geographic, and customer diversity, all can be used to develop the right company image.

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Operations Matter Too

Last, properly addressing and presenting the logistical aspects of the company are greatly important. These issues include demonstrating smooth-running and easily transferable production or sourcing operations, well organized order, fulfillment and service activities, and sales / distribution processes that can be transferred seamlessly to a buyer. The issues range from how people and facilities can be transitioned or replaced to how UPC and EDI codes will move over to the new owner. Since vendors, retailers, and end customers have no patience for logistical disruptions, all of these issues need to be carefully planned for and presented in a way that ensures buyers of a smooth transition.

Consumer product companies enjoy some of the highest valuation multiples in the M&A world. To fully realize yours, consider getting help from someone experienced in properly addressing all the unique issues that affect these multiples.

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