When thinking about the key factors of acquisition success in m&a, marketing probably wouldn’t be the first factor that comes to your mind. But this is becoming a big thing. Mc Kinsey just published an article, where it described the potential as „the way to superior growth„. In the end, marketing means creating revenue generating potential, which is the basis for company growth.
For those who are not familiar with m&a: Before you sell your car, you refurbish it, to be able to sell it for a higher price. Spending a couple of hundred euros and some hours of your time can often increase the value by €1.000+. In m&a we call this the premium valuation. If you are planning to sell a company, you position your compnay as an „aqcuisition opportunity“ for investors. If the m&a consultant is doing a good job, he might be able to increase the value by 30% and more.
One of the main valuation drivers here is the growth potential. In this article I will write about the most undervalued business assset nobody is talking about (and the key insight my business is based on).
Customer Lifetime Value
I did an analysis on Amazon, Facebook, Google, Netflix and all the other big tech players with the focus on „hidden values in stocks“, i.e. „the not so obvious“ things.
First, I found there is one thing all these companies have in common, which is a high customer lifetime value (LTV).
They make more many on one customer than other companies. Therefore – and that’s a big deal – they can spend money on marketing to win one customer.
So, if you, as a business, have the same target group as someone else with a higher LTV, you are doomed (longterm), as the cost of doing marketing (which is nothing else than buying peoples attention, which is a limited resource), gets higher over time, until you can’t afford it anymore.