Current market conditions are challenging, but deals are getting done. BPM Partners Terry Hill, Michael VanderKlugt, Julie West and Dan Winter discuss how companies in need of liquidity can best position themselves for success.

Achieving liquidity is challenging in today’s uncertain market conditions, particularly for mid-market and emerging companies. To succeed at raising funding — be it debt or equity — or selling your company, organizations need to relentlessly focus on preparation, strategy and execution in an environment where competition for capital is fierce. The playbook from nine months ago simply won’t work.

The good news is that deals are still getting done — we’re seeing everything from early-stage equity financing, venture and debt financing to growth equity, joint ventures, buyouts and more. The IPO markets are also starting to come back to life as well. The bottom line is that there’s still capital out there; however, investors are inherently more demanding in this period of elevated volatility and risk. To succeed in finding liquidity in this climate, it’s critical to provide evidence of how your organization is well-positioned for sustained growth.

For life science or technology companies, money is available for first-rate products and teams with solid science and technology. Likewise, organizations in other sectors, such as consumer, business-to-business services and industrials, are currently seeing opportunities as well, but their core fundamentals and future growth potential must be promising. Demonstrating economic strength (via data such as growth rate, customer retention, conversion rates, margins, etc.) and competitive advantage is especially critical in building successful interactions with new and existing investors in the current environment.

In other words, companies and the entrepreneurs behind them must be well prepared — adopting a higher level of rigor and business acumen than they needed in past market cycles. Specifically, they should be able to:

• Tell their stories to potential investors clearly, credibly and succinctly (be miserly with the number of slides in your deck).
• Find a way to stand out in a sea of competing pitches (emphasize market leadership, market position defensibility, and product or service differentiation).
• Paint an aspirational picture of the future that you can stand behind.
• Have a cogent and compelling growth plan (simply claiming a percentage of a large, total addressable market won’t cut it).
• Be able to articulate how historical performance supports your thesis for growth (using a bottoms-up projection that highlights new products or services, customer cohort growth, channel growth, etc.).

Without this level of preparation (which typically needs to begin six to nine months before a transaction close), any potential deal could be dramatically underpriced, or worse yet: flat-out killed.

Finding efficiencies

Given the intense competition for funding and the negative impacts on valuations in a slowing economy, companies should also employ strategies to help current cash last longer. This could include scaling back – right-sizing – production, pausing development, or release of secondary or tertiary products, reducing headcount, or finding other operational efficiencies.

How BPM can help

For the emerging and mid-market companies seeking it, liquidity is out there. But in tighter market conditions, it requires clearly articulating the strong fundamentals, operational rigor and potential for growth that will satisfy discerning investors being flooded with competing pitches.

Many entrepreneurs will need to do some self-examination to thrive in this environment. Some incorrectly assume that they can handle the demands of deal execution in addition to their other leadership responsibilities. The amount of time and effort required is typically prohibitive, and those leaders who are spread too thin could hinder the success of a transaction.

One solution is third-party support with the experience needed to seamlessly drive the deal forward and the people in place to implement the processes needed throughout the transaction lifespan. Our team of dedicated professionals can help you determine the right path to liquidity and help you get from deal readiness to execution. Get in touch with us today to discuss your path forward.

BPM’s Business Lifecycle

To help with your evolution at every stage of the growth lifecycle, BPM’s Business Lifecyle Center has been developed to help guide our clients through any stage and economic backdrop. Our services focus on remaining organizationally proactive to help leadership avoid falling into the trap of stagnation. We invite you to explore our Business Lifecycle Center and see how we can support your organization’s evolution.