NCDM Panelists: ‘Predictability Equals Value’ in Today’s M&A Climate

PHILADELPHIA — Small direct marketing companies looking to be acquired can maximize their value by building synergies with larger companies and building products that are beneficial to larger companies, a panelist said at yesterday’s NCDM summer conference.

When preparing to sell a small direct marketing firm, it also is important that the company have a high amount of corporate value, said Christopher J.P. Velis, senior vice president of Brown Brothers Harriman & Co., a Boston-based investment firm.

“Companies with a high value assure a buyer or investor that the future is going to be bright,” he said. Now more than ever “predictability equals value. Companies with less risk and more certain earnings are worth more today.”

Panelist Jim Alvarez, also with Brown Brothers, offered some points to think about when positioning a direct marketing company for sale. To make a company attractive to sell, it’s important that it have a unique selling position, as well as consistent cash flow.

A lack of customer and supplier concentration, he said, “minimizes the risk associated with future revenue stream and reduces risk to business if a supplier becomes financially unstable or engages in aggressive pricing tactics.”

Finally, Alvarez said, “successful entrepreneurs have an exit strategy in place when they first start up their companies.”

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