QuickTake: Levers to Increase Enterprise Value - Modern Distribution Management

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QuickTake: Levers to Increase Enterprise Value

Dorn Group’s James Dorn and Tom Gale recap some of the key themes from MDM’s recent Distribution M&A Summit and outline the most pertinent areas of improvement for EBITDA margin, growth and value.
Speedometer with value word on blue light. Business concept

Here at MDM, we’re still sifting through a multitude of discussions and thoughtful topics that came up during our recent Virtual M&A Summit, which was held Feb. 22-23. Executive Editor Mike Hockett recently wrote about keys to successful build-buy-invest strategies based on a summit session he moderated with three distribution industry leaders. M&A was also a major theme in our February 2023 issue of Premium Monthly, which you can read about here.

The beat goes on, as MDM CEO Tom Gale recently sat down with Dorn Group’s James Dorn for the latest QuickTake podcast to talk about which levers companies can take advantage of to increase enterprise value following a merger or acquisition.

“Once you’ve purchased something, how do you create that incremental value?” Dorn said. “And that’s where I think there were some great insights shared on what are those value-creation levers that you as a leader in distribution can keep top of mind.”

Pursuing inorganic bolt-on acquisitions is one lever distributors can use, but things can get more difficult when companies step back and ask themselves whether they have a strong growth plan over the next three years, Dorn said.

“And is that growth plan somewhat vetted to where it will give a new buyer some confidence that it’s actually going to be achievable?” he asked.

Sales effectiveness, pricing, market development and other factors will be rolled up into a type of lever of revenue and growth, Dorn said. Putting more diligence and emphasis into an organization’s digital attack — with omnichannel, digital and mobile analytics — is another “big lever” that can drive value for distributors, he added.

Last but not least is talent. Talent development, retention, and how good a company is at recruiting and maintaining top talent can also create valuable leverage for distributors, Dorn said.

Gale and Dorn also talked about salesforce optimization as a lever — specifically how distributors can execute effective customer segmentation to increase value.

“It’s one thing to identify the customers who may have more potential. It’s another thing to actually have market demand, sizing by individual product categories, and then to identify which one of your customers is most prone to buy those additional adjacent product categories from you,” Dorn said. “So, being able to give that level of intelligence to your sales and marketing teams gives them a head start into who they should be focused on, number one. Number two, what product categories that should be focused on. And then you give them these conversion programs to where they can say, ‘Hey, you’re not buying this from us. Here’s our value prop around that. Here’s where we have a certain level of value that we can provide to you, Mr. Customer to help you to win this business from you.'”

Listen to the full podcast episode via the audio player above, and check out our full library of MDM Podcasts here.

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