5 Strategic Solutions for Middle Market Privately-Held Businesses in 2024

5 Strategic Solutions for Middle Market Privately-Held Businesses in 2024

Marjory Loebe

January 25, 2024

As we step into 2024, middle market privately-held business owners who are looking to exit in the coming years are facing a mix of challenges and opportunities that require a savvy and practical touch to maneuver. From economic shifts to technological advancements, several issues loom on the horizon, and these can seem daunting for those interested in selling. How can a privately-held business overcome the projected concerns and sell their business without regrets? Below are some of the issues at hand and helpful strategic solutions to address them in such a way that will impress both the buying and fund source communities.

1. Economic Uncertainty

One of the primary concerns for middle market businesses in 2024 is the ongoing economic uncertainty. Global events, market fluctuations, and geopolitical tensions can impact business operations and financial stability.

To navigate economic uncertainties, businesses should focus on building resilience – a process that aligns seamlessly with preparing for a successful sale transaction. One resilience-building technique is to diversify revenue streams, which also creates company sustainability. Steps to diversify revenue include:

a) Identify untapped opportunities or emerging trends through market research.

b) Explore complementary products or services that align with existing offerings. Bundle or package existing products/services in new and creative ways.

c) Develop digital products, software solutions, or leverage E-commerce platforms to expand reach.

d) Form strategic partnerships or collaborations with other businesses or explore joint ventures that leverage the strengths of different entities for mutual benefit.

e) Evaluate the potential for international expansion. Explore new markets and customers beyond the business’s current geographic scope.

f) Use customers to help create customer-centric products or services.

g) Create recurring revenue by setting up subscriptions for services, maintenance, QC, training, etc.

Diversification is not just about spreading risk; it is about unlocking new avenues for growth and ensuring the business remains relevant and overall resilient. A seasoned M&A Advisor can adeptly navigate this challenge by teaching an owner how to turn economic challenges into opportunities for optimization, thereby enhancing the business's appeal to potential buyers.

2. Technological Disruption

The rapid pace of technological evolution poses both opportunities and challenges for middle market businesses. Adapting to modern technologies while ensuring cybersecurity is a delicate balancing act. A company should embrace technological advancements strategically. It should invest in digital transformation initiatives that enhance efficiency and customer experience. Simultaneously, companies should prioritize cybersecurity measures to protect sensitive data and maintain business continuity. As businesses grapple with technological advancements, the role of an M&A Advisor extends to evaluating the technological landscape. Identifying areas for improvement and aligning the business with innovative solutions become catalysts for success. By leveraging technology as an asset, an M&A Advisor transforms challenges into opportunities, ensuring the business is not only adaptable but also attractive to prospective buyers.

3. Talent Acquisition and Retention

The competition for skilled talent is intensifying. Middle market businesses need to attract and retain top-tier employees in order to stay competitive, but this can be a significant challenge. It is important to foster a positive workplace culture that values employee well-being and professional growth. Offering competitive compensation packages and flexible work arrangements along with investing in training and development programs to retain and attract top talent are all important. This is not just an operational concern but a strategic one for businesses planning to sell. An M&A Advisor steps in by assessing and enhancing organizational capabilities and can ensure contracts are in place – thus making the business a more enticing prospect for acquisition. By optimizing human capital, an M&A Advisor turns talent challenges into opportunities for bolstering the business's overall value.

4. Regulatory Compliance

Navigating the complex landscape of regulations and compliance requirements can be overwhelming for middle market businesses. Staying abreast of changes and ensuring adherence is crucial. In these uncertain times, it is important to establish a robust compliance management system. Things like regularly updating policies and procedures, conducting internal audits, and seeking legal counsel to ensure compliance with relevant regulations are all proactive compliance efforts that can prevent legal issues down the road. Moreover, navigating the regulatory landscape is a critical aspect of preparing a middle market privately-owned business for sale. An M&A Advisor provides guidance on compliance management, the mitigation of legal risks, and the enhancement of market appeal. Turning regulatory challenges into opportunities involves highlighting a business's commitment to compliance and ethical practices – factors that resonate positively with potential acquirers.

5. Environmental, Social, and Governance (ESG) Expectations

Stakeholders – including customers and investors – increasingly prioritize ESG considerations. Businesses must align with sustainable and ethical practices in order to meet these expectations by integrating ESG principles into business strategies. Implementing sustainable practices, promoting social responsibility, and transparently communicating efforts to meet ESG goals not only satisfies stakeholders but also contributes to long-term business sustainability. Meeting heightened ESG expectations is not just a responsibility but a selling point in today’s politically-sensitive business environment. An M&A Advisor plays a pivotal role in transparently communicating a business's sustainable practices. By turning ESG challenges into opportunities, a business can align with evolving standards and position itself as an attractive investment. This is particularly crucial for businesses looking to appeal to buyers who prioritize responsible and sustainable investments.

Amid ever-increasing challenges, the decision to sell a business becomes a strategic move, and the guidance of an experienced M&A Advisor becomes invaluable. Far from being impediments, the challenges of 2024 are opportunities in disguise, waiting to be positively leveraged. A strong M&A Advisor transforms these challenges into selling points, ensuring that the business not only overcomes hurdles but emerges as an attractive proposition for potential buyers. From financial optimization to market positioning, the expertise of an M&A Advisor is the linchpin in orchestrating a successful and lucrative sale amidst the complexity businesses currently face.

If any of this resonates with you, we encourage you to complete our M&A Discovery Questionnaire and talk with us to see if your business makes the cut as one who can still command a great exit in this M&A environment. We will be in touch quickly to discuss the results. Click here to take the assessment.

Gilbert & Pardue Transaction Advisors (GaP) is a Houston-based business advisory firm serving lower middle and middle market business owners from coast to coast through representation for Mergers & Acquisitions (Matt Gilbert and Bret Pardue established GaP to provide owners of privately-held businesses – those businesses generally enjoying annual revenue of $10-$80 million – with the quality of M&A representation and value-enhancement services previously only available to upper middle and large businesses. GaP brings highly experienced executives, sophisticated financial and marketing products, proven-effective processes, and fully integrated expertise to every engagement. No other M&A firm serving the lower middle and middle market provides the quality of representation and transactional expertise that we do.

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