Value Creation in Transactions: Increasing the sales value of companies

Value creation in three areas

Strengthening financial and operational performance and improving the market and competitive position are key value creation levers. These should be translated into a resilient concept (equity story) that takes the following aspects into account:

1. Profitable growth: optimising the core business and leveraging additional growth potential, e.g. via

• Diversification of the customer base
• Increasing the customer share of wallet through an expanded offering
• Transferring technologies to new markets and/or product innovation
• Development of recurring revenue streams with higher retention rates
• Utilisation of synergy effects (primarily with strategic investors)

2. Increasing efficiency and optimising processes
3. Optimisation of financial levers

Profitable growth

The development of sales and the level of profitability are key drivers for the valuation of a company or business unit. The sales structure (e.g. proportion of recurring sales, cluster risks, etc.) is also highly relevant. Effective levers for defining a growth path in line with the market are available both in corporate management and in marketing and sales:

Competitive environment and market dynamics

• Which segments offer growth and profitability potential? How does the positioning match the identified market developments
• Which internal capabilities and resources enable differentiation from the competition?
• What potential lies in the areas of product life cycle and innovation?

Strategy development and implementation

• What are the key strengths and how can these be utilised efficiently for future sales growth? And how high are the investments required for this?
• How do formulated goals support the achievement of long-term and profitable growth in the given market context?

• Effectiveness of sales and marketing: In principle, the more precise (i.e. more reliable) the top line and growth planning is, the greater the effectiveness of sales and marketing. The close integration of financial, strategic and operational planning is therefore a key basis for success.
  The following questions should also be focussed on:
  • Are the "right" customers/markets being served?
  • How can the addressable market be enlarged and expansion into neighbouring markets successfully driven forward? Are there synergy effects for the (strategic) investor?
  • Which sales channels flank this strategy/strategies?
  • What strategies and skills are needed to optimise the marketing activities, processes and technologies in such a way that the ROMI (return on marketing investment) can be further increased?
• Customer experience
  • Which contact points can be used to reach customers in the best possible way?
  • How can optimal customer, employee and partner experiences be designed and regularly developed? How are these evaluated?
  • What synergy effects result from this for (strategic) investors?
• Pricing & profitability
  • Which products/services deliver which profit contribution?
  • How are the product groups prioritised and correctly dimensioned in order to increase long-term profitability?
  • What scope is there for pricing (negotiating power - customer and channel-specific)?

Increasing efficiency and optimising processes

More efficient processes increase profitability and make companies more attractive to investors. Efficiency improvements and process optimisation can be applied in all operational and support areas, including the following levers and issues:

• Structural and organisational improvements:
  • What are the resource requirements in relation to business planning? Does the requirement match the existing headcount? Can it be "leaner" without significant loss of quality?
  • Are the areas sufficiently interlinked (e.g. integration of purchasing and production)
  • Would it be advantageous to outsource certain activities?
  • How many performance and control levels are required?
• Purchasing and procurement (direct & indirect):
  • Is there a procurement strategy in place that includes topics such as merchandise management, supplier strategy (including rationalisation) and setting up strategic contracts?
  • How do the procurement organisation and the underlying processes and systems fit in with the defined strategy? Is there potential for cost reduction?
• Supply Chain:
  • What opportunities exist to improve supply planning and demand forecasting?
  • What is the potential for optimising transport spend and processes?
• Operations:
  • What are the underlying lean principles to increase the value-added portion of processes?
  • Is there robust planning and a corresponding level of maturity in the S&OP process? What operational KPIs are used to measure productivity?
  • How does the current production footprint match the expected capacity requirements and corporate strategy? (If necessary, calculate the required investment needs)
  • Should rationalisation or relocation be considered in light of the operational core competencies and the relevant market/competitive environment?
• Information technology and applications:
  • Which systems enable the best management of the company?
  • Are there opportunities for system rationalisation and migration?
  • How can automation (including AI) or optimisation of the system architecture contribute to cost reduction?

Optimisation of financial levers

Key financial levers enable companies to reduce capital commitment and improve liquidity and creditworthiness, including in the areas of

• Working Capital Management:
  • How can customer receivables, liabilities and inventories be optimised?
  • To what extent is there a detailed picture of the working capital cycle?
• Realisation of price increases
  • Are existing margins sufficiently utilised or is there unused potential through structured price negotiations?
• Reporting and transparency
  • Does the existing management reporting fulfil increasing stakeholder requirements in terms of informative value and reliability?
  • How can business intelligence tools help to increase transparency?
  • How are ERP systems used to optimise receivables management, production and purchasing?
• Integration of the financiers:
  • Existing contracts (change-of-control clauses) can be used to regulate co-determination rights or approval obligations and special cancellation rights of the financiers, e.g. the exclusion of certain interested parties (funds excluded via blacklist). A transaction facilitates redemption, but this may not be desired by the company or investor. In any case, it is advisable to involve the financiers as early as possible and to communicate openly with them.