How to ensure documentation and coherence between market growth / positioning, strategy plan and financial projection

In a transaction, it is likely that there will be multiple parties on the sell and buy-side requiring the same information, as well as potentially asking for it in slightly different ways.

Preparation and documentation, therefore, is one of the most vital components to ensuring stakeholders are aligned, and the overall story that you want to tell is cohesive. Having your ducks in a row can make the difference between success, and buyers losing confidence in a prospective transaction. 

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Preparation and documentation, therefore, is one of the most vital components to ensuring stakeholders are aligned, and the overall story that you want to tell is cohesive.

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Being clear on the story you want to tell

So, the plan has been prepared and all the relevant information has been collected, what else do we need to consider? 

At this point, the most important consideration is the communication between the Corporate Finance (CF) adviser and any Vendor Due Diligence (VDD) teams, as it helps to ensure that all key messages are consistently presented to the different stakeholders involved. This will be the responsibility of your CF adviser.

Not only is alignment key between the CF adviser and any VDD teams, but also the management team. If your management team is telling a different story to your CF adviser, this creates a disconnect that will only serve to lower confidence on the buy-side. Clear and aligned messaging is what needs to be achieved to instill confidence – not mixed messages. 

Finally, it’s also worth considering that the story you want to tell will likely vary depending on who is on the buy-side. For example, if you are seeking Private Equity (PE) investment, you will need to have a strong growth story and a business plan that fits in with market projections.  A Strategic Buyer (SB) on the other hand will most likely have eyes on a particular aspect of your business that compliments theirs, which should therefore take centre stage. 

One source of the truth

It may seem obvious, but it’s imperative that proper preparation is undertaken early to ensure that financial information is robust and that there is ‘one source of the truth’.

For example, this could be a financial model covering historic and forecast years, which can be drawn upon for each of the information requests to ensure the buyer’s questions are answered consistently.

If information is pulled from a different dataset, then it is important that this can be reconciled to the underlying numbers in the core dataset to ensure that the information is robust and provides confidence in the analysis.

Consistent historical KPIs 

To instill confidence in your plan when considering your finances, it’s important that the projections are built from the bottom up and [SM1] in the way that you think about your business. This could be, for example, by business unit, or product, or even geography.

Assumptions driving the projections should then be driven by historical KPIs. This is important to demonstrate that there is a rationale for why that assumption has been selected. 

As a rule of thumb, a complete plan should include three years of historical data, the current financial year, as well as a further three years of forecast projections. 

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