When preparing your business for transformative transaction, an expert partner is key to positioning your business in the best way possible to meet the needs of the transaction and interested parties. We can overcome many obstacles, but it undoubtedly helps when the business owner has built a ‘hot target’ company. Here are some of the primary aspects of an equipment rental business that are evaluated:
First, it may seem obvious, but the most sought-after businesses have a track record of positive revenue trends. This includes EBITDA of 35% or more, steady historical growth, clean books and a strong balance sheet.
Second is the marketplace. Is the business located in a high-population market area and is there a strong base of construction and industrial commerce to support equipment rental?
Next is the quality and newness of capital assets. Ideally, the equipment base or fleet has an average age of less than five years. The company has purchased high-quality rental equipment and invests in regular service and maintenance.
Then there are the facilities. Does the business have a large facility with room to grow? Is there a large laydown area if needed for storage? Are the facilities owned or leased, and are the lease terms favorable given the current market?
Of course, the company’s culture and employee base are also big factors. Companies with a positive, supportive culture with several long-standing, experienced and loyal staff member are more attractive than businesses with high turnover and issues due to a toxic culture.
And finally, the operational strength of the business impacts its value. Companies that have invested wisely in technologies that improve efficiency and reduce operating expenses will be more attractive. Established business protocols and procedures make a difference. And an effective marketing program is a plus too.
A business can still complete a successful transaction without checking all of these boxes, but as a business owner, it’s wise to invest time and effort into improving weak areas and maintaining as much strength as possible in all areas.
What about your business? Do you believe it’s strong in all of these areas? If not, which areas are the most challenging? We’d love to hear your comments!