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TRANSACT IONS SUMMIT ENGINEERING GROUP COMPLETES INTEGRATION WITH MODJESKI AND MASTERS Modjeski and Masters , a nationwide leader in the design, inspection, and rehabilitation of all bridge types, including long-span and movable structures, announced the full integration of Summit Engineering Group . Modjeski and Masters first acquired Summit Engineering Group in 2015. The firm’s specialty in concrete bridge design and construction has enhanced Modjeski and Masters’ ability to better serve its clients and strengthen the
nation’s infrastructure. Following the complete integration, Summit Engineering Group will now officially operate as Modjeski and Masters. “Over the past three years, we have successfully leveraged the collective expertise of our two firms for the benefit of multiple infrastructure projects across the country,” said Mike Britt, President and CEO at Modjeski and Masters. “With expanded services, and broader and deeper expertise in key areas, we are positioned to offer clients an even greater level of service – as one firm.”
MARK ZWEIG, from page 1
So, here are my thoughts about how to increase your value – whether you exit through an internal or external sale. And these are important strategic matters either way: 1)Revenue growth rate. Many so-called experts tout multiples of EBITDA as the most important value drivers but the fact is high revenue growth rate affects value probably more than anything. If you don’t believe me, look at the public markets where some companies never make a profit yet have multi-billion dollar valuations. And consistent growth is valued more so than sporadic, up and down growth. 2)Profitability. One would be naïve to say profitability doesn’t matter to any buyer of any business. Of course, a buyer needs profitability to pay back their investment. But what really matters is what the buyer’s projections are for post-sale profitability. There are many addbacks and deductions to consider. Many highly profitable companies in this business are that way because the owners underpay themselves salary-wise. That jacks up profits. Another reason for better than normal profits may be a lack of investment in marketing, technology, facilities, or people. These would be deductions, then, from a buyer’s standpoint. Addbacks include things such as excess salaries and benefits for owners, reduced overhead from insurance sav- ings and duplicate outside professional service providers, and/or overhead staff. We have worked with some companies where the buyer’s view of post-transaction profit- ability was one that more than tripled what the company was currently doing. It is important to understand “profitability” in a privately-held company is rarely reflected accurately on an income statement. 3)Brand name. A good brand is worth a lot of money in this business. CH2M-Hill was a great brand at one time. HOK Sport was an amazing brand. EDSA is a real brand. I could go on. These companies are worth more because clients chase them down to do their work, rather than the other way around. They also have higher fees. It is like “Mc- Donald’s” versus “Joe’s Burgers.” If you open a McDonald’s, cars will line up the first day. Customers know what to expect and will pay a premium for it. But you have to be care- ful. You don’t want that brand name to be tied only to your star or stars, or it won’t be perceived by potential buyers as something that they can actually buy. 4)Management and staff. You need good people there and depth in the ranks for all positions. If the only “good” people are the owners, your value will go down. Buyers want to know there are others who are trained and capable at every level to not only do the work that comes in but also carry on running the place as the post-transaction demotivated owners (they got theirs) move on or prepare to move on. This takes a real succession plan, training, and mentoring (yes, I despise the word but it is meaningful in this context!). 5)Systems. Having a great file system where everything can be found increases your val- ue. So does a widely shared and up-to-date client and potential client database. No one wants to buy a business where all of the history or marketing information or business development contacts are stored in the brains of those no longer with the company or on portable rolodexes that can be picked up and carried off à la Mad Men . So, hopefully by now you can see how all of this stuff is important and intimately tied to your firm’s strategy. And it all makes you worth more, whether the sale is internal or external. MARK ZWEIG is Zweig Group’s chairman and founder. Contact him at mzweig@zweiggroup.com.
1200 North College Ave. Fayetteville, AR 72703 Mark Zweig | Publisher mzweig@zweiggroup.com Richard Massey | Managing Editor rmassey@zweiggroup.com Christina Zweig | Contributing Editor christinaz@zweiggroup.com Sara Parkman | Editor and Designer sparkman@zweiggroup.com Liisa Andreassen | Correspondent landreassen@zweiggroup.com
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© Copyright 2019. Zweig Group. All rights reserved.
THE ZWEIG LETTER February 18, 2019, ISSUE 1284
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