A Growth Strategy or an Exit Strategy both take an EBIT Strategy

By Ray Stasieczko – Well if you are in the Imaging Channel you were either bought out or at the least been approached to sell. The acquisition frenzy is the buzz these days. The landscape of the Independent dealer is changing. The large venture-backed dealers are buying up more and more of their competition. Most dealer organizations within the channel have already decided on a Growth Strategy or an Exit Strategy, and some have decided on a Maintain Strategy. Global Imaging Systems a Xerox company defines its acquisition formula on their website as this. “(Adjusted Operating Profit x Multiplier) – Debt + Excess Cash.” “Operating Profit refers to your company’s most recent twelve months of Earnings Before Interest and Taxes. This is also referred to as EBIT” http://www.gisx.com/acquisitions/

Whether you Sell or decide to Grow the first thing you must do is get the balance sheet in order and make sure that the organization’s profitability is at the highest level possible. Why is the Imaging Channel believing the non-sense that single or low double-digit EBIT is acceptable? After all, selling your company is a multiple of earnings figure. Oh, there are the stories of the seller who got a five times multiple of revenue and sailed off into the sunset. The bottom line in 2017 a print-centric organization with no other annuity-based service deliverable will not sell for revenue unless of course, they have a 20 percent of revenue of EBIT because in that case, the buyer would pay a five maybe six times multiple of EBIT which by the math would equal or exceed their revenue.

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Imaging Channel, What’s Your FCE Costing You?